Anton believes his company's overhead costs are driven (affected) by the number of machine hours because the production process is heavily automated. During the period, the company produced 3,500 units of Product A requiring a total of 300 machine hours and 2,500 units of Product B requiring a total of 75 machine hours. What allocation rate should be used if the company incurs overhead costs of $16,875?
A) $45 per machine hour
B) $2.81 per machine hour
C) $2.81 per unit
D) $45 per unit

Question

Quizplus · Accepted Answer

The allocation rate is calculated by dividing the total overhead costs by the total machine hours. Here, $16,875 / 375 machine hours (300 + 75) = $45 per machine hour.

Anton Believes His Company's Overhead Costs Are Driven (Affected) by the Number