Question

Gold Company uses a plantwide overhead rate with machine hours as the allocation base. Use the following information to solve for the amount of machine hours estimated per unit of product RST.
Direct material cost per unit of RST $15
Total estimated manufacturing overhead $300,000
Total cost per unit of RST $80
Total estimated machine hours 150,000 MH
Direct labor cost per unit of RST $23
A. 21 MH per unit of RST.
B. 2 MH per unit of RST.
C. 20 MH per unit of RST.
D. 37.5 MH per unit of RST.
E. 38 MH per unit of RST.

Answer 1

Answer:

A. 21 MH per unit of RST

Explanation:

Total cost = Direct material + Direct labor + Overhead

$80 = $15 + $23 + Overhead

Overhead = $80 - $15 - $23

Overhead = $42

Plant-wide overhead rate = Total estimated manufacturing overhead / Total estimated machine hours

Plant-wide overhead rate =$300,000 / 150,000 machine hours

Plant-wide overhead rate =$2 per machine hours

Machine hour per unit of RST = Overhead per unit of RST / Plant wide overhead rate

Machine hour per unit of RST = $42/$2

Machine hour per unit of RST = 21 machine hour per unit of RST

Thus, the machine hour per unit of RST is 21 Machine Hour per unit of RST.