Question

At the beginning of the year, a company estimates total overhead costs of $614,900. The company applies overhead using machine hours and estimates it will use 1,430 machine hours during the year. What is the estimated overhead cost per machine hour?

1) $430.00
2) $430.50
3) $431.00
4) $431.50

Answer 1

The estimated overhead cost per machine hour is calculated by dividing the total overhead costs by the estimated machine hours, which results in $430.00 per machine hour.

Step-by-step explanation:

To calculate the estimated overhead cost per machine hour, you divide the total estimated overhead costs by the estimated number of machine hours.

In this case, the company estimates total overhead costs to be $614,900, and it expects to use 1,430 machine hours over the course of the year. Using these numbers, you calculate the overhead cost per machine hour by dividing $614,900 by 1,430 hours.

Doing the math:
$614,900 ÷ 1,430 = $430

Therefore, the estimated overhead cost per machine hour is $430.00, which corresponds to option 1).