Question

Cozy, Inc., manufactures small and large blankets. It estimates $530,850 in overhead during the manufacturing of 64,247 small blankets and 98,875 large blankets. What is the predetermined overhead rate per machine hour if a small blanket takes 2 machine hour and a large blanket takes 3 machine hours

Answer 1

Predetermined manufacturing overhead rate= $1.25 per machine hour

Step-by-step explanation:

Giving the following information:

Estimated manufacturing overhead= $530,850

Total estimated machine hours= 64,247*2 + 98,875*3= 425,119

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 530,850 / 425,119

Predetermined manufacturing overhead rate= $1.25 per machine hour