The Rowe Corporation uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard machine-hours. During January, the company budgeted to incur $225,000 in manufacturing overhead cost and to operate at a denominator activity level of 25,000 machine-hours. At standard, each unit of finished product requires 3 machine-hours. The following cost and activity were recorded during January: The amount of overhead cost that the company applied to Work in Process for January was:
A) $217,750
B) $225,000
C) $221,600
D) $216,000

Question

The Rowe Corporation uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard machine-hours. During January, the company budgeted to incur $225,000 in manufacturing overhead cost and to operate at a denominator activity level of 25,000 machine-hours. At standard, each unit of finished product requires 3 machine-hours. The following cost and activity were recorded during January:  The amount of overhead cost that the company applied to Work in Process for January was:
A) $217,750 
B) $225,000 
C) $221,600 
D) $216,000

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $225,000 ÷ 25,000 machine-hours = $9 per machine-hour
Overhead applied = Predetermined overhead rate × Standard hours allowed for the actual output
= $9 per machine-hour × (8,000 units × 3 machine-hours per unit)
= $9 per machine-hour × (24,000 machine-hours)
= $216,000

The Rowe Corporation Uses a Standard Cost System in Which