Lake Prairie Company uses a plantwide overhead rate with machine hours as the allocation base.Next year,500,000 units are expected to be produced taking .75 machine hours each.How much overhead will be assigned to each unit produced given the following estimated amounts?
$$\begin{array} { l c r }
\text { Estimated: } & \text { Department 1 } & \text { Department } 2 \
\text { Manufacturing overhead costs } & \$ 3,107,500 & \$ 1,520,000 \
\text { Direct labor hours } & 150,000 D L H & 200,000 \mathrm { DLH } \
\text { Machine hours } & 200,000 \mathrm { MH } & 175,000 \mathrm { MH }
\end{array}$$
A) $12.34 per unit
B) $7.77 per unit
C) $9.25 per unit
D) $15.20 per unit
E) $10.36 per unit

Question

Lake Prairie Company uses a plantwide overhead rate with machine hours as the allocation base.Next year,500,000 units are expected to be produced taking .75 machine hours each.How much overhead will be assigned to each unit produced given the following estimated amounts?
$$\begin{array} { l c r } 
\text { Estimated: } & \text { Department 1 } & \text { Department } 2 \
\text { Manufacturing overhead costs } & \$ 3,107,500 & \$ 1,520,000 \
\text { Direct labor hours } & 150,000 D L H & 200,000 \mathrm { DLH } \
\text { Machine hours } & 200,000 \mathrm { MH } & 175,000 \mathrm { MH }
\end{array}$$
A) $12.34 per unit
B) $7.77 per unit
C) $9.25 per unit
D) $15.20 per unit
E) $10.36 per unit

Quizplus · Accepted Answer

The total estimated manufacturing overhead is $3,107,500 + $1,520,000 = $4,627,500. The total estimated machine hours are 200,000 + 175,000 = 375,000 MH. The plantwide overhead rate is $4,627,500 / 375,000 MH = $12.34 per MH. Each unit takes 0.75 MH, so the overhead assigned per unit is $12.34 * 0.75 = $9.25.

Lake Prairie Company Uses a Plantwide Overhead Rate with Machine