Almaraz Corporation has two manufacturing departments--Forming and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Forming Finishing Total Estimated total machine-hours (MHs) 7,000 3,000 10,000 Estimated total fixed manufacturing overhead cost $ 40,600 $ 8,100 $ 48,700 Estimated variable manufacturing overhead cost per MH $ 1.30 $ 2.80 Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. That predetermined manufacturing overhead rate is closest to: $6.62 $4.87 $4.10 $7.10

The correct answe is B.

Explanation:

Giving the following information:

Forming Finishing Total

Estimated total machine-hours (MHs) 7,000 3,000 10,000

Estimated total fixed manufacturing overhead cost $ 40,600 $ 8,100 $ 48,700

Estimated variable manufacturing overhead cost per MH $ 1.30 $ 2.80

To calculate the estimated manufacturing overhead rate for the whole plant we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= (48,700/10,000)= $4.87 per machine-hour

statement of owner's equity;