Creswell Enterprises’ budget included the following estimated costs for the 2019 accounting period:
Depreciation on manufacturing equipment…………………………… $ 30,400
Cost of manufacturing supplies………………………………………….. 6,000
Direct labor cost ……………………………………………………….172,800
Rent on manufacturing facility………………………………………… 15,200
Direct materials cost………………………………………………….. 148,000
Manufacturing utilities cost…………………………………………….12,000
Maintenance cost for manufacturing facility…………………………….8,400
Administrative salaries cost……………………………………………. 61,000
The company uses a predetermined overhead rate based on machine hours. It estimated machine hour usage for 2019 would be 30,000 hours.
Required
a. Identify the manufacturing overhead costs Creswell would use to calculate the predetermined overhead rate.
b. Calculate the predetermined overhead rate.
c. Explain why the rate is called “predetermined.”
d. Assuming Creswell actually used 31,000 machine hours during 2019, determine the amount of manufacturing overhead it would have applied to Work in Process Inventory during the period.
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