Question

Fab Technologies uses practical capacity to allocate its overhead costs to products, using machine hours. In 2014, the company’s overhead rate was $300 per machine hour. Total overhead cost was $3,000,000. Total machine hours used to make products for clients equaled 8,000. What was the cost of unused capacity in 2014?

Answer 1

3,000,000/300=10,000 hours of machine being used

8000 hours used to make products

10,000-8,000=2000 hours were unused capacity

cost of unused capacity= 2000*300=600,000

Step-by-step explanation: