MANAGERIAL ACCOUNTING

MFG OH PRE$-$DETERMINED MOH REQ. PROBLEM $1$

& $2$

Prof. R$.$S$.$ Claire

PROBEM $1$

Kitco Inc. is a specialty manufacture of machine parts for various clients and uses a job cost

system to value its work in process, finished goods inventories and cost of goods sold. The

company uses a normal overhead rate to applied manufacturing overhead to the parts it

manufacturers. It is the end of the fiscal year and the cost accounting department and the

manufacturing manager are working on developing a new predetermined Manufacturing

Overhead rate for the entire manufacturing plant. They have decided to use direct labor hours

as the cost driver for applying overhead to each job. The company has budgeted sales of

$$21,000,000$ for the next fiscal year. The direct labor hours budgeted for the next fiscal year

to reach the budgeted sales goal is $320,000$ hours. The budgeted manufacturing fixed

overhead for next fiscal year is $$10,000,000$ and the variable manufacturing overhead is

$$6,000,000.$

From the information above, calculate the predetermine manufacturing overhead rate

to be used for the next fiscal year.