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Use the following information to answer the next question:Estimated manufacturing overhead$520,000Estimated machine hours16,000Actual machine hours worked15,000Actual overhead costs incurred:  Indirect materials$180,000  Indirect labour$135,000  Utilities$ 40,000  Insurance$ 20,000  Rent$150,000If the company uses a predetermined overhead rate to apply overhead, manufacturing overhead applied would be:Question 2Select one:a.$487,500b.$520,000c.$525,000d.$554,667

Question

Use the following information to answer the next question:Estimated manufacturing overhead520,000Estimatedmachinehours16,000Actualmachinehoursworked15,000Actualoverheadcostsincurred:  Indirectmaterials520,000Estimated machine hours16,000Actual machine hours worked15,000Actual overhead costs incurred:  Indirect materials180,000  Indirect labour135,000  Utilities135,000  Utilities 40,000  Insurance20,000  Rent 20,000  Rent150,000If the company uses a predetermined overhead rate to apply overhead, manufacturing overhead applied would be:Question 2Select one:a.487,500b.487,500b.520,000c.525,000d.525,000d.554,667

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Solution

The predetermined overhead rate is calculated by dividing the estimated manufacturing overhead by the estimated machine hours.

So, Predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours = 520,000/16,000hours=520,000 / 16,000 hours = 32.5 per machine hour

Then, to find the manufacturing overhead applied, you multiply the predetermined overhead rate by the actual machine hours worked.

So, Manufacturing overhead applied = Predetermined overhead rate * Actual machine hours worked = 32.5permachinehour15,000hours=32.5 per machine hour * 15,000 hours = 487,500

Therefore, the answer is a. $487,500.

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