Question

Anton believes his company's overhead costs are driven (affected) by the number of machine hours because the production process is heavily automated. During the period, the company produced 3,000 units of Product A requiring a total of 100 machine hours and 2,000 units of Product B requiring a total of 25 machine hours. What allocation rate should be used if the company incurs overhead costs of $10,000?

Answer 1

$80 per machine hour

Step-by-step explanation:

Total machine hours required

= 100 hours + 25 hours

= 125 hours

Total overhead cost = $10000

= $10000 / 125 hours

= $80 per machine hour