Yellow 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 RST. $\begin{array}{lr}
\text {Direct material cost per unit of RST } &\$ 12 \
\text {Total estimated manufacturing overhead } &\$ 200,000 \
\text {Total cost per unit of RST } &\$ 75 \
\text { Total estimated machine hours } &100,000 \
&\mathrm{MH} \
\text { Direct labor cost per unit of RST } &\$ 23
\end{array}$
A)40 MH per unit of RST.
B)2 MH per unit of RST.
C)20 MH per unit of RST.
D)37.5 MH per unit of RST.
E)80 MH per unit of RST.

Question

Yellow 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 RST. $\begin{array}{lr}
 \text {Direct material cost per unit of RST } &\$ 12 \
 \text {Total estimated manufacturing overhead   } &\$ 200,000 \
 \text {Total cost per unit of RST   } &\$ 75 \
 \text { Total estimated machine hours } &100,000 \
 &\mathrm{MH} \
 \text { Direct labor cost per unit of RST } &\$ 23
\end{array}$
A)40 MH per unit of RST.
B)2 MH per unit of RST.
C)20 MH per unit of RST.
D)37.5 MH per unit of RST.
E)80 MH per unit of RST.

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate:
\begin{align*}
	ext{Predetermined overhead rate} &= \frac{	ext{Total estimated manufacturing overhead}}{	ext{Total estimated machine hours}} \
&= \frac{\$200,000}{100,000	ext{ MH}} \
&= \$2/	ext{MH}
\end{align*}
Next, we can use the formula:
\begin{align*}
	ext{Total cost per unit of RST} &= 	ext{Direct material cost per unit of RST}+	ext{Direct labor cost per unit of RST}+	ext{Manufacturing overhead cost per unit of RST} \
75 &= 12+23+	ext{Manufacturing overhead cost per unit of RST} \
	ext{Manufacturing overhead cost per unit of RST} &= 40
\end{align*}
Finally, we can use the predetermined overhead rate to calculate the machine hours estimated per unit of product RST:
\begin{align*}
	ext{Machine hours estimated per unit of product RST} &= \frac{	ext{Manufacturing overhead cost per unit of RST}}{	ext{Predetermined overhead rate}} \
&= \frac{40}{\$2/	ext{MH}} \
&= 20	ext{ MH per unit of RST}
\end{align*}
Therefore, the answer is choice C.

Yellow Company Uses a Plantwide Overhead Rate with Machine Hours