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Managerial Accounting

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Predetermined Overhead Rate for Shelves

MGRACT-1LEV66

A firm manufactures industrial shelves for warehouses. To manufacture the shelves, the firm estimates it will use 800,000 direct labor hours and 500,000 machine hours. Machine hours represent a critical determinant for the number of shelves that can be produced. Last year, the actual overhead costs were \$3,675,000. Those costs are not likely to change in the upcoming year. However, there is one consideration that needs to be addressed in the budget. The company anticipates hiring more salaried supervisors to support product line expansion, which will result in \$625,000 in additional costs.

What is the predetermined OH Rate?

A

$4.59

B

$7.35

C

$5.38

D

$8.60