The Ammon Company uses a standard cost system in which manufacturing overhead is applied to units on the basis of standard machine-hours.During July,the company budgeted $350,000 in manufacturing overhead cost at a denominator activity of 25,000 machine-hours.At standard,each unit of finished product requires 5 machine-hours.The following cost and activity were recorded during July: The amount of overhead cost that the company applied to work in process for July was:
A)$292,500
B)$315,000
C)$322,000
D)$325,000

Question

The Ammon Company uses a standard cost system in which manufacturing overhead is applied to units on the basis of standard machine-hours.During July,the company budgeted $350,000 in manufacturing overhead cost at a denominator activity of 25,000 machine-hours.At standard,each unit of finished product requires 5 machine-hours.The following cost and activity were recorded during July:  The amount of overhead cost that the company applied to work in process for July was:
A)$292,500 
B)$315,000 
C)$322,000 
D)$325,000

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead cost F1F1F1S1F1F1F10 Estimated total amount of the allocation base = $350,000 F1F1F1S1F1F1F10 25,000 machine-hours = $14 per machine-hour
Overhead applied = Predetermined overhead rate F1F1F1S1F1F1F10 Standard hours allowed for the actual output
= $14 per machine-hour F1F1F1S1F1F1F10 5 machine-hours per unit F1F1F1S1F1F1F10 4,500 units = $315,000

The Ammon Company Uses a Standard Cost System in Which