Smith Paints Allocates Overhead Based on Machine Hours The Estimates Were Made as of the Beginning of the the Most

question 2

Multiple Choice

Smith Paints allocates overhead based on machine hours.Selected data for the most recent year follow. $$\begin{array} { | l | r | } \hline \text { Estimated manufacturing overhead cost } & \$ 250,000 \\\hline \text { Actual manufacturing overhead cost } & \$ 230,000 \\\hline \text { Estimated machine hours } & 20,000 \\\hline \text { Actual machine hours } & 21,000 \\\hline\end{array}$$ The estimates were made as of the beginning of the year,while the actual results were for the entire year.
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The predetermined manufacturing overhead rate per machine hour is closest to:

• A)$11.90.
• B)$10.95.
• C)$12.50.
• D)$11.50.

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Definitions:

Product Costs

Expenses directly tied to the production of goods or services, including direct materials, direct labor, and manufacturing overhead.

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a unit of product.

Inventory Buildup

The accumulation of products or materials in excess of demand, often leading to increased storage costs and reduced cash flow.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including expenses like rent, salaries, and insurance.