Flawless Cosmetic Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Loren is the department manager of the Makeup Department which produces Products - Concealer (C)and Glow Cream (GC).Jennifer is the department manager of the Hair Care Department which manufactures Product - Shampoo (S).The product costs (per case of 24 bottles)and other information are as follows:

Based on this information,if Flawless changes its allocation basis to machine hours,what is the overhead rate per machine hour?

A) $3.00
B) $2.00
C) $21.00
D) $6.825

Question

Flawless Cosmetic Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Loren is the department manager of the Makeup Department which produces Products - Concealer (C) and Glow Cream (GC) .Jennifer is the department manager of the Hair Care Department which manufactures Product - Shampoo (S) .The product costs (per case of 24 bottles) and other information are as follows:

Based on this information,if Flawless changes its allocation basis to machine hours,what is the overhead rate per machine hour?

A) $3.00 
B) $2.00 
C) $21.00 
D) $6.825

Quizplus · Accepted Answer

To calculate the overhead rate per machine hour, we need to calculate the total overhead and total machine hours for each department. 
For the Makeup Department: 
Total overhead = $133,000 
Total machine hours = 5,000 
Overhead rate per machine hour = $133,000 / 5,000 = $26.60 
For the Hair Care Department: 
Total overhead = $88,000 
Total machine hours = 2,000 
Overhead rate per machine hour = $88,000 / 2,000 = $44 
The average overhead rate per machine hour is the average of the overhead rates for each department: 
($26.60 + $44) / 2 = $35.30 
Therefore, the overhead rate per machine hour is $6.825 (option D) is incorrect as it does not reflect the correct calculation.

Flawless Cosmetic Company Manufactures and Distributes Several Different Products