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The Collins Company forecasts that total overhead for the current year will be $12,000,000 and that total machine hours will be 200,000 hours. Year to date, the actual overhead is $8,000,000 and the actual machine hours are 100,000 hours. If the Collins Company uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead rate?

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Answer:

Estimated manufacturing overhead rate= $60 per machine hour

Explanation:

Giving the following information:

The Collins Company forecasts that total overhead for the current year will be $12,000,000 and that total machine hour will be 200,000 hours.

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= 12,000,000/200,000

Estimated manufacturing overhead rate= $60 per machine hour

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