
Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below:

Estimated machine-hours

72,100
 
Estimated variable manufacturing overhead

$ 3.40

per machine-hour

Estimated total fixed manufacturing overhead

$ 838,760
 
The predetermined overhead rate for the recently completed year was closest to:




To calculate the predetermined overhead rate, we use the following formula:

\[
\text{Predetermined Overhead Rate} = \frac{\text{Estimated Total Manufacturing Overhead}}{\text{Estimated Total Machine-Hours}}
\]

Where:

1. **Estimated Total Manufacturing Overhead** is the sum of estimated fixed manufacturing overhead and estimated variable manufacturing overhead.
2. **Estimated Variable Manufacturing Overhead** per machine-hour is given as $3.40.
3. **Estimated Total Fixed Manufacturing Overhead** is given as $838,760.
4. **Estimated Machine-Hours** is 72,100.

Let's calculate step by step:

### 1. Calculate the Estimated Total Variable Manufacturing Overhead:
\[
\text{Estimated Variable Manufacturing Overhead} = \text{Variable Overhead Rate} \times \text{Estimated Machine-Hours}
\]
\[
= 3.40 \times 72,100 = 245,140
\]

### 2. Calculate the Estimated Total Manufacturing Overhead:
\[
\text{Estimated Total Manufacturing Overhead} = \text{Fixed Overhead} + \text{Variable Overhead}
\]
\[
= 838,760 + 245,140 = 1,083,900
\]

### 3. Calculate the Predetermined Overhead Rate:
\[
\text{Predetermined Overhead Rate} = \frac{1,083,900}{72,100} \approx 15.04 \, \text{per machine-hour}
\]

The predetermined overhead rate for the recently completed year was **closest to $15.04 per machine-hour**.

Would you like a deeper explanation or have any other questions?

Here are 5 related questions to think about:
1. How would the predetermined overhead rate change if machine-hours were underestimated?
2. Why is it important for companies to establish a predetermined overhead rate?
3. What effect does fixed overhead have on the overall overhead rate compared to variable overhead?
4. How can a company adjust its predetermined overhead rate if actual hours differ significantly from estimated hours?
5. How would overhead costs be allocated if both labor-hours and machine-hours were considered?

**Tip:** Always compare estimated values to actual outcomes to adjust overhead rates for future planning.

Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below: Estimated machine-hours: 72,100; Estimated variable manufacturing overhead: $3.40 per machine-hour; Estimated total fixed manufacturing overhead: $838,760. The predetermined overhead rate for the recently completed year was closest to:

Learn how to calculate the predetermined overhead rate for Giannitti Corporation using machine-hours, fixed manufacturing overhead, and variable manufacturing overhead. This problem is essential for understanding cost accounting concepts, suitable for undergraduate students.

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