Felton Quality Productions Uses a Predetermined Overhead Allocation Rate Based

question 36

Multiple Choice

Felton Quality Productions uses a predetermined overhead allocation rate based on machine hours.It has provided the following information for the year: $$\begin{array} { | l | r | } \hline \text { Actual manufacturing overhead costs incurred } & \$ 100,000 \\\hline \text { Manufacturing overhead costs allocated to production } & \$ 56,000 \\\hline \text { Actual direct materials cost } & \$ 220,000 \\\hline \text { Actual direct labor cost } & \$ 40,000 \\\hline \text { Actual machine hours } & 32,000 \text { hours } \\\hline\end{array}$$ Based on the above information,calculate the predetermined overhead allocation rate applied by Felton Quality.(Round your answer to the nearest cent. )

• A)$1.75 per machine hour
• B)$3.13 per machine hour
• C)$6.88 per machine hour
• D)$1.25 per machine hour

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Definitions:

Average Rate of Return

A financial metric used to evaluate the profitability of an investment, calculated as the average annual profit divided by the initial investment cost.

Residual Value

The estimated value that an asset will realize upon its disposal at the end of its useful life.

Useful Life

The estimated period over which a fixed asset is expected to be usable by a company, beyond which it is considered to depreciate.

Average Rate of Return

A financial ratio that calculates the average annual return an investor can expect over the lifetime of an investment, expressed as a percentage of the original investment.