BBonita Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year. Budgeted Actual
Overhead cost $1,333,200 $1,307,200
Machine hours 56,300 49,000
Direct labor hours 101,000 97,800
Overhead is applied on the basis of direct labor hours. Compute the predetermined overhead rate.

$23.68 per machine hour

Explanation:

Given the above information, the predetermined overhead rate is computed as

= Budgeted overhead cost / Estimated number of machine hours

Budgeted overhead cost = $1,333,200

Estimated number of machine hours = 56,300

Therefore,

Predetermined overhead rate

= $1,333,200 / 56,300

Predetermined overhead rate= $23.68 per machine hour

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