Question

Peterson Company estimates that overhead costs for the next year will be $6,520,000 for indirect labor and $550,000 for factory utilities. The company uses machine hours as its overhead allocation base. If 140,000 machine hours are planned for this next year, what is the company's plantwide overhead rate

Answer 1

Answer:

$50.50 per machine-hour

Explanation:

The computation of the  company's plantwide overhead rate is shown below:

Estimated Manufacturing Overhead = Estimated Indirect Labor + Estimated Factory Utilities

= $6,520,000 + $550,000

= $7,070,000

and,

Expected Machine-hours = 140,000

So,  

Plantwide Overhear Rate = Estimated Manufacturing Overhead ÷ Expected Machine-hours

= $7,070,000 ÷ 140,000

= $50.50 per machine-hour