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:
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

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: 
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.

Quizplus · Accepted Answer

To calculate the overhead cost applied to work in process, we need to first calculate the predetermined overhead rate:
Predetermined overhead rate = Budgeted overhead cost / Denominator activity level
Predetermined overhead rate = $300,000 / 20,000 machine hours = $15 per machine hour

Next, we need to calculate the total machine hours used in production during October:
Total machine hours used = 37,500 + 47,500 = 85,000 machine hours

Finally, we can calculate the overhead cost applied to work in process:
Overhead cost applied = Actual machine hours used x Predetermined overhead rate
Overhead cost applied = 85,000 machine hours x $15 per machine hour = $1,275,000

Therefore, the correct answer is B ($285,000).

The Adlake Company Makes and Sells a Single Product and Uses