John is currently working on assembling some cost accounting numbers for the upcoming year for a client who produces disposable utensils. The factory has the following costs: Factory Insurance, $55,000; Factory Supervisor's Salary, $200,000; Direct Materials (Plastic), $30,000; Cardboard for Packaging, $12,000; Depreciation on Factory Equipment, $120,000; and Assembly Line Worker Wages, $36,000. The Direct Labor (DL) costs consisted of 10,000 DL hours and 4,000 machine hours. Management has decided to proceed using a simple costing system resulting in a plant-wide cost pool. What is the budgeted MOH rate using one plant-wide pool based on machine hours?
A) $0.01
B) $10.42
C) $37.50
D) $93.75

Question

Quizplus · Accepted Answer

This question requires you to calculate the budgeted MOH rate using the formula of total budgeted MOH costs divided by the total budgeted quantity of one cost driver. This company has chosen to use machine hours as their cost driver. This calculation is ($55,000 + $200,000 + $120,000)/4,000 machine hours = $375,000/4,000 machine hours = $93.75 (Choice D).
I would show the computation to get $375,000. In chapter packaging is part of MOH.
All primary packing materials like cardboard, boxes, cartons, etc. are treated as direct material costs.

John Is Currently Working on Assembling Some Cost Accounting Numbers