Question

H. Company uses a plantwide overhead rate with machine hours as the allocation base. Next year, 600,000 units are expected to be produced taking .75 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

Estimated:

Department 1

Department 2

Manufacturing overhead costs

$3,107,500

$1,520,000

Direct labor hours

150,000 DLH

250,000 DLH

Machine hours

250,000 MH

175,000 MH

Answer 1

The overhead assigned to each unit produced at H. Company is $8.17, calculated by determining the plantwide overhead rate and multiplying it by the machine hours required per unit.

Step-by-step explanation:

To calculate the overhead assigned to each unit produced at H. Company, we first need to determine the plantwide overhead rate using machine hours as the allocation base. The company expects to produce 600,000 units next year, with each unit requiring 0.75 machine hours.

The total manufacturing overhead costs are the sum of the overhead costs for Department 1 and Department 2, which is $3,107,500 + $1,520,000 = $4,627,500. The total machine hours from both departments are 250,000 MH + 175,000 MH = 425,000 MH.

To find the plantwide overhead rate, divide the total manufacturing overhead costs by the total machine hours: $4,627,500 / 425,000 MH = $10.89 per machine hour. Since each unit requires 0.75 machine hours, the overhead assigned to each unit is 0.75 MH × $10.89/MH = $8.17 per unit.