Question

Pinacle Corp. budgeted $350,000 of overhead cost for the current year. Actual overhead costs for the year were $325,000. Pinacle's plantwide allocation base, machine hours, was budgeted at 50,000 hours. Actual machine hours were 40,000. A total of 10,000 units was budgeted to be produced and 9,800 units were actually produced. Pinacle's plantwide factory overhead rate for the current year is: Group of answer choices

Answer 1

Pinacle Corp.

Pinacle's plantwide factory overhead rate for the current year is:

= $7 per machine hour.

Step-by-step explanation:

a) Data and Calculations:

Budgeted overhead cost for the current year = $350,000

Actual overhead costs for the year = $325,000

Plantwide allocation base, machine hours = 50,000

Actual machine hours = 40,000

Budgeted production units = 10,000

Actual production units = 9,800

The plantwide factory overhead rate for the current year is:

= Budgeted overhead cost/Budgeted machine hours

= $350,000/50,000 = $7 per machine hour

Allocated overhead = 40,000 * $7 = $280,000

Under-absorbed overhead = $45,000 ($325,000 - $280,000)