Pinnacle Corp. budgeted $700,000 of overhead cost for the current year. Actual overhead costs for the year were $650,000. Pinnacle's plantwide allocation base, machine hours, was budgeted at 100,000 hours. Actual machine hours were 80,000. A total of 100,000 units was budgeted to be produced and 98,000 units were actually produced. Pinnacle's plantwide factory overhead rate for the current year is
A)$8.13 per machine hour
B)$7.00 per machine hour
C)$6.50 per machine hour
D)$8.75 per machine hour

Question

Quizplus · Accepted Answer

The plantwide factory overhead rate is calculated by dividing the budgeted overhead costs by the budgeted machine hours: $700,000 / 100,000 hours = $7.00 per machine hour.