Question

The company manufactures three-wheeled bikes for adults. The company allocates manufacturing overhead based on machine hours. Cedar River expects to incur $250,000 of manufacturing overhead costs, and to use 10,000 machine hours during fiscal year 2018. Cedar River reported the following inventories at May 31, 2018:

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

The company allocates manufacturing overhead based on machine hours. Cedar River expects to incur $250,000 of manufacturing overhead costs and to use 10,000 machine hours during the fiscal year 2018.

We were not provided with enough information or even what is required. But, we can provide with some formulas to guide the problem:

First, we need to calculate the estimated overhead rate:

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

Estimated manufacturing overhead rate= 250,000/10,000= $25 per machine hours.

To allocate the overhead we need to use the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Suppose 8,000 machine hours were necessary:

Allocated MOH= 25*8,000= $200,000