Vektek, Inc.thinks machine hours is the best activity base for its manufacturing overhead.The estimate of annual overhead costs for its jobs was $1,025,000.The company used 1,000 hours of processing on Job No.B12 during the period and incurred overhead costs totaling $1,050,000.The budgeted machine hours for the year totaled 20,000.How much overhead should be applied to Job No.B12?
A)$1,050
B)$51,250
C)$52,500
D)$1,025

Question

Quizplus · Accepted Answer

The overhead rate is calculated as estimated overhead costs divided by budgeted machine hours: $1,025,000 / 20,000 hours = $51.25 per hour. For Job No. B12, with 1,000 hours, the applied overhead is 1,000 hours * $51.25 = $51,250.