Question

Western Company allocates $10 overhead to products based on the number of machine hours used. 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 $270,000 $170,000
Direct labor hours 10,000 DLH 32,000 DLH
Machine hours 17,000 MH ________MH

a. 98,000 MH
b. 151,700 MH
c. 27,000 MH
d. 90,700 MH
e. 37,000 MH

Answer 1

Answer:

The correct answer is C.

Explanation:

Giving the following information:

Western Company allocates $10 overhead to products based on the number of machine hours used.

Estimated: Department 1 Department 2

Manufacturing overhead costs $270,000 $170,000

Machine hours 17,000 MH ________MH

To calculate the number of machine-hours for Department 2, we need to use the following formula:

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

10= 440,000/(17,000 + MH)

10*(17,000 + MH)= 440,000

170,000 + 10MH = 440,000

10MH = 270,000

Machine hours dept 2= 270,000/10= 27,000