A furniture manufacturer uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: The overhead applied to products during the period was closest to:
A)$74,460
B)$72,270
C)$67,408
D)$71,955

Question

A furniture manufacturer uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:  The following data pertain to operations for the most recent period:  The overhead applied to products during the period was closest to:
A)$74,460 
B)$72,270 
C)$67,408 
D)$71,955

Quizplus · Accepted Answer

The standard predetermined overhead rate is calculated as follows:

Total Budgeted Manufacturing Overhead Costs / Total Budgeted Machine-Hours

Using the data from the flexible budget, the total budgeted manufacturing overhead costs are $674,080 and the total budgeted machine-hours are 4,000.

Therefore, the standard predetermined overhead rate is:

$674,080 / 4,000 MHs = $168.52 per MH

To determine the overhead applied to products during the period, we need to know the actual machine-hours used. According to the data given, the actual machine-hours used were 420, which is less than the budgeted machine-hours of 500.

Therefore, the overhead applied to products during the period is:

Actual Machine-Hours Used x Standard Predetermined Overhead Rate

420 MHs x $168.52 per MH = $70,678.40

Therefore, the closest option to the overhead applied to products during the period is answer choice C) $67,408.

A Furniture Manufacturer Uses a Standard Costing System in Which