Question 19

The predetermined overhead rate is $0.31.

To calculate the predetermined overhead rate, divide the estimated total overhead by the estimated activity level, which in this case is the number of shoes. Thus, $1,250,000 divided by 4,000,000 shoes equals $0.31 per shoe.

A) $0.31

Option A is correct because it accurately represents the calculated predetermined overhead rate. By dividing the estimated total overhead of $1,250,000 by the estimated production of 4,000,000 shoes, the result is indeed $0.31 per shoe.

B) $0.33

Option B is incorrect as it does not reflect the correct calculation of the predetermined overhead rate. If we calculate $1,250,000 divided by 4,000,000, it does not yield $0.33; hence, this option misrepresents the overhead allocation.

C) $0.34

Option C is also incorrect because it suggests an overhead rate that is not supported by the calculation. The predetermined overhead rate must be based on the specific division of total overhead by total production, which does not result in $0.34.

D) $0.38

Option D is incorrect as well. A predetermined overhead rate of $0.38 would imply a significantly higher overhead allocation than what the figures support. The calculation clearly shows that $1,250,000 divided by 4,000,000 results in a much lower rate of $0.31.

Conclusion

The correct predetermined overhead rate of $0.31 is derived from the proper calculation of total overhead divided by the production quantity. All other options incorrectly represent this relationship, demonstrating a misunderstanding of how to calculate the predetermined overhead rate accurately. Thus, Option A stands out as the only correct choice.