Question

Assume a business has $100,000 in overhead costs and 20,000 total machine hours. Also assume that...

Assume a business has $100,000 in overhead costs and 20,000 total machine hours. Also assume that the business uses machine hours as the allocation base. If one of the departments used 10,000 machine hours, what is the total amount of overhead allocated to that department?

Answer choices:

A) $100,000

B) $200,000

C) $10,000

D) $50,000

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Homework Answers

Answer #1
Ans. Option D   $50,000
*First of all, we need to find out a predetermined overhead rate.
Predetermined overhead rate   =   Budgeted overhead cost / Budgeted machine hours
$100,000 / 20,000
$5.00   per machine hour
*Now we can calculate the amount of overhead allocated to the department.
Overhead allocated = Actual machine hours * Predetermined overhead rate
10,000 * $5
$50,000
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