Question

Arling Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended:

Actual units produced: 12,000
Actual fixed overhead incurred: $730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 50,000
If Arling estimates four hours to manufacture a completed unit, the company's standard fixed overhead rate per machine hour would be:
A. $12.00.
B. $14.40.
C. $14.60.
D. $15.00.
E. some other amount.

Answer 1

The standard fixed overhead rate per machine hour would be $14.40.

Step-by-step explanation:

To find the company's standard fixed overhead rate per machine hour, we need to divide the budgeted fixed overhead by the planned level of machine-hour activity. In this case, the budgeted fixed overhead is $720,000 and the planned level of machine-hour activity is 50,000.

So, the standard fixed overhead rate per machine hour would be:
$720,000 / 50,000 = $14.40