Question

White Company manufactures furniture. Assume the following information:

1) Manufacturing overhead is allocated based on machine hours.
2) Manufacturing overhead is estimated to be $150,000 and machines hours are expected to be 10,000 hours.
3) The actual manufacturing overhead is $31,000 and there are 2,000 actual machine hours.

How much manufacturing overhead would White Company allocate?

Answer 1

$30,000

Step-by-step explanation:

Standard allocation rate = Estimated maufacturing overheads ÷ estimated machine hours

Standard rate = $150,000 ÷ 10,000 hours = $15 per machine hour

Actual overheads incurred = $31,000

Actual machine hours = 2000 hours

Overheads are to be allocated based upon predetermined/standard absorption rate being $15 per machine hour

Manufacturing overheads to be allocated = 2000 hours × 15 per machine hour

Manufacturing overheads to be allocated = $30,000