Horton Industries Company Uses a Predetermined Overhead Rate Based on Machine-Hours

Multiple Choice

Horton Industries 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:
$\begin{array}{llr} \text { Direct materials } &\$10,000\\ \text { Direct labor } &\$30,000\\ \text { Sales commissions } &\$40,000\\ \text { Salary of production supervisor } &\$20,000\\ \text { Indirect materials } &\$4,000\\ \text { Advertising expense } &\$8,000\\ \text {Rent on factory equipment } &\$10,000\\\end{array}$

Horton estimates that 5,000 direct labor-hours and 10,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:

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