Question

At the beginning of the year, Monroe Company estimates annual overhead costs to be $500,000 and that 250,000 machine hours will be operated. Using machine hours as a base, the amount of overhead applied during the year if actual machine hours for the year was 150,000 hours is A.$500,000. B.$300,000. C.$600,000. D.$150,000.

Answer 1

Allocated MOH= $300,000

Step-by-step explanation:

Giving the following information:

Estimated annual overhead costs= $500,000

Estimated machine-hour= 250,000

Actual machine-hour= 150,000

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 500,000/250,000

Predetermined manufacturing overhead rate= $2 per machine hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 2*150,000= $300,000