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At the beginning of a year, a company predicts total direct materials costs of $1,010,000 and total overhead costs of $1,270,000. If the company uses direct materials costs as its activity base to allocate overhead, what is the predetermined overhead rate it should use during the year?

Respuesta :

TomShelby

Answer:

1.267 = Overhead Rate

Explanation:

As general approach, the manufacturing rate, along with any rate is done by dividing the cost by a cost driver.

[tex]\frac{Cost\:Of\: Manufacturing\: Overhead}{Cost\: Driver}= $Overhead \:Rate[/tex]

In this case teh cost is the manufacturing overhead and the cost driver the direct materials cost:

[tex]\frac{1,270,000}{1,010,000}= $Overhead Rate[/tex]

Using Direct Materials cost, the rate would be:

[tex]1.257425743= $Overhead Rate[/tex]

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