The Judd Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of machine-hours. During May, the company budgeted £320,000 in manufacturing overhead cost at a denominator activity of 20,000 machine-hours. At standard, each unit of finished product requires 4 machine-hours. The following cost and activity was recorded during May:$\begin{array}{ll}
\text { Total actual manufacturing ov erhead cost incurred } & £ 335,500 \
\text { Units of product completed } & 4,700 \
\text { Actual machine-hours worked } & 21,000
\end{array}$
The amount of overhead cost that the company applied to Work in Process for May was

A)£336,000.
B)£335,500.
C)£300,800.
D)£315,370.

Question

The Judd Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of machine-hours. During May, the company budgeted £320,000 in manufacturing overhead cost at a denominator activity of 20,000 machine-hours. At standard, each unit of finished product requires 4 machine-hours. The following cost and activity was recorded during May:$\begin{array}{ll}
\text { Total actual manufacturing ov erhead cost incurred } & £ 335,500 \
\text { Units of product completed } & 4,700 \
\text { Actual machine-hours worked } & 21,000
\end{array}$
The amount of overhead cost that the company applied to Work in Process for May was

A)£336,000.
B)£335,500.
C)£300,800.
D)£315,370.

Quizplus · Accepted Answer

The overhead cost applied to Work in Process is calculated based on the standard cost system, which applies manufacturing overhead on the basis of machine-hours. The company budgeted £320,000 for 20,000 machine-hours, so the standard rate is £320,000 / 20,000 = £16 per machine-hour. For May, with 21,000 actual machine-hours worked, the applied overhead cost is 21,000 hours * £16/hour = £336,000. However, there was a mistake in my calculation. The correct calculation for the applied overhead should consider the units of product completed and the standard machine-hours per unit. Since each unit requires 4 machine-hours and 4,700 units were completed, the total standard machine-hours are 4,700 units * 4 hours/unit = 18,800 machine-hours. Therefore, the correct applied overhead cost is 18,800 machine-hours * £16/machine-hour = £300,800.

The Judd Company Uses a Standard Cost System in Which