Question

A company estimates that overhead costs for the next year will be $8,320,000 for indirect labor and $155,500 for factory utilities. The company uses machine hours as its overhead allocation base. If 400,000 machine hours are planned for this next year, what is the company's plantwide overhead rate

Answer 1

The company's plantwide overhead rate is 21.19%

Step-by-step explanation:

given information:

indirect labor = $8,320,000

factory utilities = $155,500

machine hours = 400,000

to calculate the overhead rate, we can use the following formula

`overheadrate = (Indirectcost)/(allocationmeasure)`

in this case.

the indirect cost = indirect labor + factory utilities

= $8,320,000 + $155,500

= $8,475,500

allocation measure = 400,000

thus,

`overheadrate = (8,475,500)/(400,000)`

= 21.19%