Madison Company produces a single product in a highly automated process. Virtually all of the company's manufacturing overhead costs are driven by its consumption of machine hours. Each unit of output requires 2.5 hours of machine time, and the company estimates that each hour of machine time requires $30 of variable overhead. Fixed overhead is budgeted at $600,000 annually and incurred evenly throughout the year. What amount of manufacturing overhead should the company budget for January when it plans to produce 200 units of product?
A) $87,500
B) $65,000
C) $40,500
D) $637,500

Question

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The Answer of Madison Company produces a single product in a highly automated process. Virtually all of the company's manufacturing overhead costs are driven by its consumption of machine hours. Each unit of output requires 2.5 hours of machine time, and the company estimates that each hour of machine time requires $30 of variable overhead. Fixed overhead is budgeted at $600,000 annually and incurred evenly throughout the year. What amount of manufacturing overhead should the company budget for January when it plans to produce 200 units of product?
A) $87,500
B) $65,000
C) $40,500
D) $637,500

Madison Company Produces a Single Product in a Highly Automated