A Company Estimates That Overhead Costs for the Next Year

question 95

Multiple Choice

A company estimates that overhead costs for the next year will be $9,234,000 for indirect labor and $156,800 for factory utilities.The company uses machine hours as its overhead allocation base.If 500,000 machine hours are planned for this next year,what is the company's plantwide overhead rate? (Round to two decimal places)

• A) $0.05 per machine hour.
• B) $18.47 per machine hour.
• C) $18.78 per machine hour.
• D) $0.31 per machine hour.
• E) $3.19 per machine hour.

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Definitions:

Carrying Costs

Carrying costs are the total expenses associated with holding or storing inventories over a certain period.

Set-Up Costs

Initial expenses incurred during the establishment of a new business or production line, including equipment and installation fees.

Storage Costs

Expenses associated with keeping goods in a warehouse or storage facility until they are sold or used.

Economic Order Quantity (EOQ)

A formula that calculates the optimal order size to minimize the total costs associated with purchasing, receiving, and holding inventory.