The Adlake Company 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:
$\begin{array}{|l|r|}
\hline \text { Total Actual Manufacturing Overhead Cost Incurred } & \$ 294,000 \
\hline \text { Units of Product Completed } & 3,800 \
\hline \text { Actual Machine Hours Worked } & 19,423 \
\hline
\end{array}$
What was the amount of overhead cost that the company applied to work in process for October?
A) $279,300.
B) $285,000.
C) $291,330.
D) $294,000.

Question

Quizplus · Accepted Answer

The overhead cost applied to work in process is calculated using the predetermined overhead rate, which is based on the budgeted manufacturing overhead cost divided by the denominator activity (machine hours). The predetermined overhead rate is $300,000 / 20,000 hours = $15 per machine hour. The company completed 3,800 units, each requiring 5 machine hours, for a total of 19,000 machine hours (3,800 units * 5 hours/unit). Therefore, the applied overhead cost is 19,000 hours * $15/hour = $285,000.

The Adlake Company Makes and Sells a Single Product and Uses