Kelsh Company Uses a Predetermined Overhead Rate Based on Machine

Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs.The company has provided the following estimated costs for next year:
$\begin{array} { l r } \text { Direct materials } & \$ 10,000 \\\text { Direct labour } & \$ 30,000 \\\text { Sales commissions } & \$ 40,000 \\\text { Salary of production supervisor } & \$ 20,000 \\\text { Indirect materials } & \$ 4,000 \\\text { Advertising expense } & \$ 8,000 \\\text { Rent on factory equipment } & \$ 10,000\end{array}$
Kelsh estimates that 5,000 direct labour hours and 10,000 machine hours will be worked during the year.What will be the predetermined overhead rate per hour?

A) $6.80.
B) $6.40.
C) $3.40.
D) $8.20.

Correct Answer:

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