Question

A company estimates that overhead costs for the next year will be $8,320,000 for indirect labor and $155,500 for factory utilities The company uses machine hours as its overhead allocation base. If 400.000 machine hours are planned for this next year, wha is the company's plantwide overhead rate? (Round your answer to two decimal places.) Multiple Choice
A. $0.05 per machine hour
B. $21.19 per machine hour
C. $20.80 per machine hour
D. $0.39 per machine hour.
E. $2.57 per machine hour

Answer 1

Answer:

The answer is B.$21.19 per machine hour.

Explanation:

We have the expected total overhead cost next years = Total expected indirect labor + Total expected factory utilities = 8,320,000 + 155,500 = $8,475,500.

Total expected machine hour = 400,000 hours.

The company's plantwide overhead rate = Expected total overhead cost next years/ Total expected machine hour ( which is an overhead allocation base) = $8,475,500 / 400,000 = $21.19 per machine hour ( round to two decimal places).

So, the answer is B.$21.19 per machine hour.