Question

Peterson Company estimates that overhead costs for the next year will be $6,520,000 for indirect labor...

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?

Select one:

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.

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Homework Answers

Answer #1

Estimated Indirect Labor = $6,520,000
Estimated Factory Utilities = $550,000

Estimated Manufacturing Overhead = Estimated Indirect Labor + Estimated Factory Utilities
Estimated Manufacturing Overhead = $6,520,000 + $550,000
Estimated Manufacturing Overhead = $7,070,000

Expected Machine-hours = 140,000

Plantwide Overhear Rate = Estimated Manufacturing Overhead / Expected Machine-hours
Plantwide Overhear Rate = $7,070,000 / 140,000
Plantwide Overhear Rate = $50.50 per machine-hour

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