(Appendix 11A)The Adlake Corporation makes and sells a single product and uses a standard cost system.During October, the company budgeted $300, 000 in manufacturing overhead cost at a denominator activity of 20, 000 machine-hours.At standard, each unit of finished product requires 5 machine-hours.The following cost and activity were recorded during October: The amount of overhead cost that the company applied to work in process for October was:
A)$279, 300
B)$291, 330
C)$294, 000
D)$285, 000

Question

(Appendix 11A)The Adlake Corporation makes and sells a single product and uses a standard cost system.During October, the company budgeted $300, 000 in manufacturing overhead cost at a denominator activity of 20, 000 machine-hours.At standard, each unit of finished product requires 5 machine-hours.The following cost and activity were recorded during October:  The amount of overhead cost that the company applied to work in process for October was:
A)$279, 300 
B)$291, 330 
C)$294, 000 
D)$285, 000

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $300, 000 ÷ 20, 000 machine-hours = $15 per machine-hour
Overhead applied = Predetermined overhead rate × Standard hours allowed for the actual output
= $15 per machine-hour × (3, 800 units × 5 machine-hours per unit)
= $15 per machine-hour × (19, 000 machine-hours)
= $285, 000

(Appendix 11A)The Adlake Corporation Makes and Sells a Single Product