Lake Erie Company uses a plant wide overhead rate with machine hours as the allocation base....

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Lake Erie Company uses a plant wide overhead rate with machine hours as the allocation base....

Lake Erie Company uses a plant wide overhead rate with machine hours as the allocation base. Next year, 760,000 units are expected to be produced taking 0.80 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

Estimated:	Department 1			Department 2
Manufacturing overhead costs	$	3,139,500		$	1,568,000
Direct labor hours		166,000	DLH		266,000	DLH
Machine hours		266,000	MH		191,000	MH

business accounting

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Answer 1

Answer #1

Answer)

Assuming that Lake Erie company's both the department produces electricity only.

Cost per machine hour:

($3139500+$1568000)/(266000mh+191000mh)

=$10.3

Cost per unit:

cost per machine hour×time taken to produce an unit

=$10.3×0.8mh=$8.24

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Answer 2

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