Ryan's Paints Allocates Overhead Based on Machine Hours

question 120

Multiple Choice

Ryan's Paints allocates overhead based on machine hours. Selected data for the most recent year follow. The estimates were made as of the beginning of the year, while the actual results were for the entire year.
The predetermined manufacturing overhead rate per machine hour is closest to

• A)$10.44.
• B)$11.75.
• C)$10.84.
• D)$12.20.

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Definitions:

Retained Earnings

The portion of a company’s profit that is held back and not distributed to shareholders as dividends, to be reinvested in the business.

EBIT

Earnings Before Interest and Taxes - an indicator of a company's profitability that calculates income without tax expenses and interest expenses.

Straight Line

A method of allocating the cost of a tangible asset over its useful life in equal installments.

Net Income

The net income a company achieves once all costs and taxes are subtracted from its total revenues.