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At the beginning of a year, a company predicts total direct materials costs of $910,000 and total overhead costs of $1,250,000. If the company uses direct materials costs as its activity base to apply overhead, what is the predetermined overhead rate it should use during the year

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Answer:

Estimated manufacturing overhead rate= $1.374 per direct material cost dollar

Explanation:

Giving the following information:

A company predicts total direct materials costs of $910,000 and total overhead costs of $1,250,000.

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= 1,250,000/910,000

Estimated manufacturing overhead rate= $1.374 per direct material cost dollar

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