At the beginning of a year, a company predicts total direct materials costs of $910,000 and total overhead costs of $1,250,000. If the company uses direct materials costs as its activity base to apply overhead, what is the predetermined overhead rate it should use during the year

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Business

Braeden George

16 June, 02:56

At the beginning of a year, a company predicts total direct materials costs of $910,000 and total overhead costs of $1,250,000. If the company uses direct materials costs as its activity base to apply overhead, what is the predetermined overhead rate it should use during the year

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Jarrett Wolfe · Answer 1

Estimated manufacturing overhead rate = $1.374 per direct material cost dollar

Explanation:

Giving the following information:

A company predicts total direct materials costs of $910,000 and total overhead costs of $1,250,000.

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

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

Estimated manufacturing overhead rate = 1,250,000/910,000

Estimated manufacturing overhead rate = $1.374 per direct material cost dollar