A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is:

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Business

Michelle Beck

3 May, 07:11

A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is:

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Merritt · Answer 1

Overhead application rate

= Budgeted overhead

Budgeted machine hours

= $900,000

30,000 hours

= $30 per machine hour

Overhead cost assigned to the product

= Overhead application rate x Actual machine hours

= $30 x 12,000 hours

= $360,000

Explanation:

In this case, there is need to determine the overhead application rate, which is the ratio of budgeted overhead to budgeted machine hours.

Then, we will obtain the overhead cost assigned to the product by multiplying the overhead application rate by actual machine hours.