The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: The standard time allowed to complete one unit of product is 3.6 machine-hours.
-The total predetermined overhead rate per machine-hour for November was:
A)$1.75
B)$2.40
C)$2.97
D)$1.40

Question

The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: The standard time allowed to complete one unit of product is 3.6 machine-hours.
-The total predetermined overhead rate per machine-hour for November was:
A)$1.75 
B)$2.40 
C)$2.97 
D)$1.40

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead F1F1F1S1F1F1F10 Estimated total amount of the allocation base
= ($36,000 + $20,000 + $24,000 + $16,000)F1F1F1S1F1F1F10 40,000 machine-hours
= $96,000 F1F1F1S1F1F1F10 40,000 machine-hours = $2.40 per machine-hour

The Chase Company Uses a Standard Cost System in Which