Lake Erie Company uses a plantwide overhead rate with machine hours as the allocation base. Next year, 790,000 units are expected to be produced taking 0.75 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

Question

Sonny Trevino

Business

13 January, 16:42

Lake Erie Company uses a plantwide overhead rate with machine hours as the allocation base. Next year, 790,000 units are expected to be produced taking 0.75 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

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Answers (1)

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Yang · Answer 1

Instructions are listed below.

Explanation:

Giving the following information:

790,000 units are expected to be produced taking 0.75 machine hours each.

We weren't provided with enough information to solve the requirement. But, I will give the formulas necessary to guide an answer and a small example.

First, we need to calculate the total amount of machine-hours required:

Total machine hours = 790,000*0.75 = 592,500 hours.

Let us suppose that the estimated manufacturing overhead is $850,000.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 850,000/592,500 = $1.44 per machine hour

Now, we can allocate overhead:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 1.44*0.75 hours = $1.08 per unit