Question

The following data relates to Mangini Company's estimated amounts for next year.
Estimated: Department 1 Department 2
Manufacturing overhead costs $320,000 $400,000
Direct labor hours 65,000 DLH 75,000 DLH
Machine hours 2,000 MH 2,500 MH
Required:
a. What is the company's plantwide overhead rate if machine hours are the allocation base? (Round your answer to two decimal places.)

Answer 1

Answer:

$160.00 per machine hour

Explanation:

The plant-wide (blanket ) overhead absorption rate is calculated as follows:

Plant-wide OAR=

Total overheads of all the production departments/ Total machine hours

Plant-wide OAR =  $(320,000 + 400,000)/(2,000+2,500) machine hours

                                        =$160.00 per machine hour