Question

The Rowe Corporation uses a standard cost system. The company applies manufacturing overhead to units of product based on machine-hours. During January, the company budgeted to incur $225,000 in manufacturing overhead cost and to operate at a denominator activity level of 25,000 machine-hours. At standard, each unit of finished product requires 3 machine-hours. The following cost and activity were recorded during January: actual total overhead incurred $ 217,750 units of product completed 8,000 units actual machine-hours worked 23,000 machine-hours Under the standard cost system, the amount of overhead cost that the company applied to products was:

Answer 1

Answer:

Allocated overhead= $216,000

Explanation:

Giving the following information:

Estimated overhead= $225,000

Estimated machine-hours= 25,000

At standard, each unit of finished product requires 3 machine-hours. Units of product completed 8,000 units

To allocate overhead, we need to use the standard number of machine-hours that would take to produce 8,000 units.

First, we need to determine the estimated overhead rate:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 225,000/25,000= &9 per machine hour

Now, we can allocate overhead:

Allocated overhead= 9*(8,000*3)= $216,000