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? a. $.02147 per machine hour. b. $50.50 per machine hour. c. $45.75 per machine hour. d. $3.9286 per machine hour. e. $.2545 per machine hour.
Answer
$50.50 per machine hour.
- Calculate total predetermined overhead cost by adding indirect labor cost and factory utilities cost. A:Total predetermined overhead cost is $7,070,000.
- Calculate the plantwide overhead rate by dividing total predetermined overhead cost by the planned machine hours. A:The plantwide overhead rate is $50.50 per machine hour.