Question

Huffington Company uses a plantwide overhead rate to apply overhead. The predetermined overhead rate is based on machine hours. At the beginning of the year, the company made the following estimates: direct labor hours of 16,000, direct labor cost of $200,000, machine hours of 5,000, and total overhead costs of $25,000. On a per machine hour basis, the company's plantwide overhead rate is:__________

Answer 1

Answer:

The company's plantwide overhead rate on a per machine hour basis is $5 per hour.

Explanation:

Acording to the data, we have the following:

Direct Labour Cost=$200,000

Direct Labour Hours= 16,000

Total Overhead Cost= $25,000

Machine Hours= 5,000

Therefore, to calcuate the company's plantwide overhead rate on a per machine hour basis, we use the following formula:

Company's plantwide overhead rate= Total Overhead/ Machine hours

                                                             = $ 25,000 / 5000 hours

                                                              =$5 per hour