Questions: Harootunian Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours: 80,690 Total fixed manufacturing overhead cost: 312,000 Variable manufacturing overhead per machine-hour: 2.10 Recently, Job T629 was completed with the following characteristics: Number of units in the job: 50 Total machine-hours: 200 The predetermined overhead rate is closest to:

Harootunian Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours: 80,690 Total fixed manufacturing overhead cost: 312,000 Variable manufacturing overhead per machine-hour: 2.10 Recently, Job T629 was completed with the following characteristics: Number of units in the job: 50 Total machine-hours: 200 The predetermined overhead rate is closest to:
Transcript text: TB MC Qu. 2-85 (Static) Harootunian Corporation uses... Harootunlan Corporation uses a job-order cosung system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: \begin{tabular}{lr} Total machine-hours & 80,690 \\ Total fixed manufacturing overhead cost & $\$ 312,000$ \\ Variable manufacturing overhead per machine-hour & $\$ 2.10$ \end{tabular} Recently, Job T629 was completed with the following characteristics: \begin{tabular}{lr} Number of units in the job & 50 \\ Total machine-hours & 200 \end{tabular} The predetermined overhead rate is closest to:
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Solution

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To determine the predetermined overhead rate, we need to calculate the total manufacturing overhead cost and then divide it by the total machine-hours.

  1. Calculate Total Manufacturing Overhead Cost:

    • Total fixed manufacturing overhead cost = $312,000
    • Variable manufacturing overhead per machine-hour = $2.10
    • Total machine-hours = 80,690

    The total variable manufacturing overhead cost is calculated as: \[ \text{Total Variable Overhead} = \text{Variable Overhead per Machine-Hour} \times \text{Total Machine-Hours} \] \[ \text{Total Variable Overhead} = 2.10 \times 80,690 = 169,449 \]

    The total manufacturing overhead cost is the sum of the fixed and variable overhead costs: \[ \text{Total Manufacturing Overhead} = \text{Total Fixed Overhead} + \text{Total Variable Overhead} \] \[ \text{Total Manufacturing Overhead} = 312,000 + 169,449 = 481,449 \]

  2. Calculate the Predetermined Overhead Rate: The predetermined overhead rate is calculated by dividing the total manufacturing overhead cost by the total machine-hours: \[ \text{Predetermined Overhead Rate} = \frac{\text{Total Manufacturing Overhead}}{\text{Total Machine-Hours}} \] \[ \text{Predetermined Overhead Rate} = \frac{481,449}{80,690} \approx 5.97 \]

Therefore, the predetermined overhead rate is closest to $5.97 per machine-hour.

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