[northvanlion]

I have a question on predetermine overhead rate and I think I am doing it right but I want a second opinion.

XXX company estimates: manufacturing overhead cost to be $800,000 and direct materials to be used in production, $500,000.
Beginning Ending
Raw materials $20,000 $80,000
Work in Process $150,000 $70,000
Finished Goods $260,000 $400,000

Following are actual cost incurred during the year
Purchase of raw materials ( all direct ) $510,000
Direct labour cost $90,000

Manufacturing overhead costs:
Indirect labour $170,000
Property taxes $48,000
Depreciation of equipment $260,000
Maintenance $95,000
Insurance $7,000
Rent, building $180,000

Compute the predetermined overheaed rate for the year??

[yessedo]

What allocation base is indicated.

You need a an allocation base (cost driver).

Also remember that manufacturing overhead does not include adding or deducting the Work in Process inventory. It is just the Total Overhead costs.

[morgaine300]

Predetermined overhead rate:



Because the problem starts with giving estimated overhead costs and estimated materials costs, I'm going to assume it's using materials as the cost driver. That's unusual, but I do see that occasionally. That is the only info given that would indicate what the cost driver might be. But that's the only info you need to figure out a predetermined overhead rate.