A company estimates that costs for the next year will be $500,000 for indirect labor,$50,000 for factory utilities,and $1,000,000 for the CEO's salary.The company uses machine hours as its overhead allocation base.If 25,000 machine hours are planned for this next year,then a product requiring 10 machine hours will be assigned $220 in overhead.

Question

Quizplus · Accepted Answer

The overhead rate is $500,000 + $50,000 + $1,000,000 / 25,000 machine hours = $60 per machine hour. A product requiring 10 machine hours will be assigned $60 * 10 = $600 in overhead.

A Company Estimates That Costs for the Next Year Will