Tungsten,Inc Calculate the Predetermined Overhead Allocation Rate

question 152

Multiple Choice

Tungsten,Inc.manufactures both normal and premium tube lights.The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base.Estimated overhead costs for the year are $106,000.Additional estimated information is given below. $$\begin{array} { | l | l | l | } \hline & \text { Normal } & \text { Premium } \\\hline \text { Machine hours } ( \mathrm { MHr } ) & 30,000 & 34,000 \\\hline \text { Direct materials } & \$ 52,000 & \$ 400,000 \\\hline\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to the nearest cent.)

• A) $3.53 per direct labor hour
• B) $1.66 per machine hour
• C) $3.12 per machine hour
• D) $0.23 per direct labor hour

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Definitions:

Costing System

A method used by organizations to determine the cost associated with producing a product or providing a service.

Managerial Decisions

Decisions made by managers within an organization, which affect the direction and operation of the business.

Underapplied Overhead

A situation where the allocated overhead costs are less than the actual overhead costs incurred.

Cost of Goods Sold

The total cost directly associated with producing the goods that have been sold during a specific period.