Question

West company estimates that overhead costs for the next year will be $5,240,000 for indirect labor and $550,000 for factory utilities. the company uses machine hours as its overhead allocation base. if 150,000 machine hours are planned for this next year, what is the company's plantwide overhead rate? $.0259 per machine hour. $34.93 per machine hour. $38.60 per machine hour. $.2727 per machine hour. $3.67 per machine hour.

Answer 1

We need overhead rate in total cost/machine hour, so
total cost = 5,240,000+550,000 = 5,790,000
total machine hours = 150,000

Average overhead = 5,790,000 / 150,000
=$38.60 / machine hour.

Answer 2

Predetermined oH rate is
(5,240,000+550,000)÷150,000
=38.6 per machine hour