The Adlake Company makes and sells a single product and uses a standard cost system.During October,the company budgeted $300,000 in manufacturing overhead cost at a denominator activity of 20,000 machine hours.At standard,each unit of finished product requires 5 machine hours.The following cost and activity were recorded during October: $\begin{array}{l}
\begin{array}{lll}
\text { Total Actual Manufacturing Overhead Cost Incurred}\
\text { Units of Product Completed}\
\text { Actual Machine Hours Worked}\
\end{array}
\begin{array}{lll}
\$ 294,000 \
3,800 \
19,422
\end{array}
\end{array}$ What was the amount of overhead cost that the company applied to work in process for October?
A) $279,300.
B) $285,000.
C) $291,330.
D) $294,000.

Question

Quizplus · Accepted Answer

The budgeted manufacturing overhead rate per machine hour is calculated as:

Budgeted manufacturing overhead cost for the month / Denominator activity level
= $300,000 / 20,000 machine hours
= $15 per machine hour

Since each unit of finished product requires 5 machine hours, the budgeted manufacturing overhead rate per unit is:

$15 per machine hour x 5 machine hours per unit
= $75 per unit

The amount of overhead cost applied to work in process is calculated as:

Actual number of units completed x Standard overhead cost per unit
= 3,800 units x $75 per unit
= $285,000

Therefore, the answer is B.

The Adlake Company Makes and Sells a Single Product and Uses