Orange Company uses a plantwide overhead rate with machine hours as the allocation base.Use the following information to solve for the amount of machine hours estimated per unit of product Q. $\begin{array}{lr}
\text { Direct material cost per unit of Q } &\$ 10 \
\text { Total estimated manufacturing overhead } &\$ 100,000 \
\text { Total cost per unit of Q } &\$ 65 \
\text { Total estimated machine hours } &200,000 \
&\mathrm{MH} \
\text { Direct labor cost per unit of Q } &\$ 20
\end{array}$
A)35 MH per unit of Q.
B).50 MH per unit of Q.
C)70 MH per unit of Q.
D)17.5 MH per unit of Q.
E)30 MH per unit of Q.

Question

Orange Company uses a plantwide overhead rate with machine hours as the allocation base.Use the following information to solve for the amount of machine hours estimated per unit of product Q. $\begin{array}{lr}
 \text {  Direct material cost per unit of Q  } &\$ 10 \
 \text { Total estimated manufacturing overhead  } &\$ 100,000 \
 \text {  Total cost per unit of Q  } &\$ 65 \
 \text { Total estimated machine hours } &200,000 \
&\mathrm{MH} \
 \text { Direct labor cost per unit of Q } &\$ 20
\end{array}$
A)35 MH per unit of Q.
B).50 MH per unit of Q.
C)70 MH per unit of Q.
D)17.5 MH per unit of Q.
E)30 MH per unit of Q.

Quizplus · Accepted Answer

Using the plantwide overhead rate, we can calculate the allocation rate as follows:

Allocation rate = Total estimated manufacturing overhead / Total estimated machine hours
Allocation rate = $100,000 / 200,000 MH
Allocation rate = $0.50 per MH

We can then use this allocation rate to calculate the amount of overhead allocated to one unit of product Q:

Overhead allocated per unit of Q = Allocation rate x Machine hours per unit of Q
$45 = $0.50 x Machine hours per unit of Q
Machine hours per unit of Q = $45 / $0.50
Machine hours per unit of Q = 70 MH per unit of Q

Therefore, the answer is C) 70 MH per unit of Q.

Orange Company Uses a Plantwide Overhead Rate with Machine Hours