The Adlake Company makes and sells a single product and uses a standard cost system.During October,the company budgeted $300,000 in fixed 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 fixed overhead cost that the company applied to work in process for October was:
A) $279,300.
B) $285,000.
C) $291,330.
D) $294,000.

Question

The Adlake Company makes and sells a single product and uses a standard cost system.During October,the company budgeted $300,000 in fixed 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 fixed overhead cost that the company applied to work in process for October was:
A) $279,300. 
B) $285,000. 
C) $291,330. 
D) $294,000.

Quizplus · Accepted Answer

First, we need to calculate the denominator activity level using the fixed manufacturing overhead cost and the predetermined overhead rate:

Predetermined Overhead Rate = Budgeted Fixed Manufacturing Overhead / Denominator Activity Level
Predetermined Overhead Rate = $300,000 / 20,000 machine-hours = $15 per machine-hour

Next, we need to calculate the actual overhead applied, using the actual machine-hours recorded and the predetermined overhead rate:

Actual Overhead Applied = Actual Machine-Hours x Predetermined Overhead Rate
Actual Overhead Applied = 55,000 machine-hours x $15 per machine-hour = $825,000

Finally, we can calculate the amount of fixed overhead cost that the company applied to work in process:

Applied Fixed Overhead = Actual Overhead Applied - Budgeted Fixed Overhead
Applied Fixed Overhead = $825,000 - $300,000 = $525,000

Therefore, the amount of fixed overhead cost that the company applied to work in process for October was $285,000 (Choice B).

The Adlake Company Makes and Sells a Single Product and Uses