At the beginning of this year, a manufacturer estimates total direct materials costs of \( \$ 1,060,000 \) and total overhead costs of \( \$ 2,353,200 \). In June of this year, the company used direct materials of \( \$ 61,000 \) in its Mixing department and \( \$ 59,000 \) in its Packaging department. Complete this question by entering your answers in the tabs below. Required \( A \) Required B Calculate the predetermined overhead rate as a percentage of direct materials cost. Predetermined overhead rate \% Previous Next

To calculate the predetermined overhead rate as a percentage of direct materials cost, you first need to determine the total costs that will be used. The total direct materials cost is given as \( \$ 1,060,000 \) and the total overhead costs are \( \$ 2,353,200 \). Now, the predetermined overhead rate can be calculated using the formula: \[ \text{Predetermined Overhead Rate} = \left( \frac{\text{Total Overhead Costs}}{\text{Total Direct Materials Costs}} \right) \times 100 \] Plugging in the numbers: \[ \text{Predetermined Overhead Rate} = \left( \frac{2,353,200}{1,060,000} \right) \times 100 \approx 222.26\% \] So, the predetermined overhead rate is approximately \( 222.26\% \). Now, let's channel our inner engineer! Understanding the predetermined overhead rate is like getting the secret recipe to ensure your projects cost efficiently. It's a key tool in managerial accounting, helping businesses allocate overhead costs smartly while anticipating the need for sensing expenses versus actual income! Here's a neat tip: Don't forget to regularly review your predetermined overhead rates! If your production processes change or material costs fluctuate greatly, your overhead rates can fall out of sync, leading to either over or under-allocated costs, which can skew your financial insights. Staying on top of it keeps your budgeting as tight as your company goals!