Bell Corporation manufactures computers. Assume that Bell:
-allocates manufacturing overhead based on machine hours
-estimated 11,000 machine hours and $88,000 of manufacturing overhead costs
-actually used 15,000 machine hours and incurred the following actual costs:
Indirect labor | $12,000 |
Depreciation on plant | 45,000 |
Machinery repair | 11,000 |
Direct labor | 73,000 |
Plant supplies | 6,000 |
Plant utilites | 6,000 |
Advertising | 38,000 |
Sales Comissions | 27,000 |
What is Bell's predetermined overhead alloation rate?
a. $5.33/machine hour
b. $5.87/machine hour
c. $8.00/machine hour
d. $7.27/machine hour
Answer: c: $8.00/machine hour
Explanation:
The predetermined overhead rate for machine hours is calculated by dividing the estimated manufacturing overhead cost total by the estimated number of machine hours. This formula refers to the predetermined overhead because this overhead total is based on estimations, rather than the actual cost.
Therefore ,
Allocation rate = estimated total overhead cost/estimated machine hours
= $88000/11000
= $8.00/machine hour
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