West Company estimates that overhead costs for the next year will be $5,240,000 for indirect labor and $550,000 for factory utilities.The company uses machine hours as its overhead allocation base.If 150,000 machine hours are planned for this next year,what is the company's plantwide overhead rate?
A)$0.0259 per machine hour.
B)$34.93 per machine hour.
C)$38.60 per machine hour.
D)$3.67 per machine hour.
E)$0.2727 per machine hour.

Question

Quizplus · Accepted Answer

To calculate the plantwide overhead rate, we need to add up the total overhead costs and divide by the total machine hours:

Total overhead costs = $5,240,000 + $550,000 = $5,790,000
Total machine hours = 150,000

Plantwide overhead rate = Total overhead costs ÷ Total machine hours
= $5,790,000 ÷ 150,000
= $38.60 per machine hour

Therefore, the correct answer is C, $38.60 per machine hour.

West Company Estimates That Overhead Costs for the Next Year