Question

Western Company allocates $10.00 overhead to each unit produced. The company uses a plantwide overhead rate with machine hours as the allocation base. Given the amounts below, how many machine hours does the company expect in department 2? Estimated: Department 1 Department 2 Manufacturing overhead costs $250,000 $150,000 Direct labor hours 8,000 DLH 12,000 DLH Machine hours 15,000 MH ? a. MH 33,000b. MH 137,500 c. MH 82,500 d. MH 25,000 MH

Answer 1

Answer:

The correct option is D,25000 machine hours

Explanation:

Department 2 machine hours can be computed using the formula for plant-wide overhead rate, which is given below:

Plantwide overhead rate = Total  Manufacturing Overhead /Total Machine hours

Plantwide overhead rate is given as $10

Total manufacturing overhead=$250000+$150000

                                                   =$400000

$10=$400000/Total Machine Hours

by cross-multiplication

Total machine hours=$400000/$10

Total machine hours is 40000 hrs

Total machine hours=machine hrs in Dept 1+machine hrs in dept 2

40000=15000+machine hrs in dept 2

Machine hrs in dept 2=40000-15000

Machine hrs in dept =25000 hrs