A company estimates that its overhead costs are $2 000 000.It decides that the best way of apportioning this is according to the amount of time spent on a specialist machine in production.Total machine time is 2000 hours.How much overhead should a product carry if it spends 3 hours on the machine?
A)$1000
B)$2000
C)$3000
D)$300

Question

Quizplus · Accepted Answer

To calculate the overhead cost per hour of using the specialist machine, we can divide the total overhead cost by the total machine time:

$2 000 000 / 2000 hours = $1000 per hour

To find the overhead cost for a product that uses the machine for 3 hours, we can multiply the hourly rate by the number of hours:

$1000/hour x 3 hours = $3000

Therefore, the product should carry $3000 of overhead cost. The answer is C.

A Company Estimates That Its Overhead Costs Are $2 000