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Managerial Accounting

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Calculating Predetermined OH Rate for Snowmobiles

MGRACT-GNBYBL

Media Corp. is preparing for the upcoming budgetary cycle. The company manufactures snowmobiles for sale to consumers. Based on data supplied from the production planning team, manufacturing overhead amounted to \$1,850,000 last year; those costs will be incurred for the coming period. However, Media will incur new safety costs of \$250,000 and another \$50,000 in packing costs. The production team plans on producing and selling 200,000 snowmobiles, and it estimates that 180,000 direct labor hours will be needed to produce the snowmobiles. Direct labor hours represent the major cost driver for the organization.

What is the predetermined overhead rate?

A

$10.56 per direct labor hour

B

$11.67 per direct labor

C

$11.94 per direct labor hour

D

$10.28 per direct labor hour