Chapter 2, Problem 6DQ

Subject: Financial Accounting

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The Cavy Company estimates that the factory overhead for the following year will be $1,620,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 45,000 hours. Calculate the predetermined overhead rate to apply factory overhead. Help

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The Cavy Company estimates that the factory overhead for the following year will be $1,620,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 45,000 hours. Calculate the predetermined overhead rate to apply factory overhead.

Answer?  Financial accounting question

In December 2019, Solar Systems Inc. management establishes the 2020 predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur $920,000 of overhead costs and $600,000 of direct labor cost in year 2020. During March 2020, Solar Systems began and completed Job No. 20-78. What is the predetermined overhead rate for year 2020?

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