Orange Company Uses a Plantwide Overhead Rate with Machine Hours

question 55

Multiple Choice

Orange 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 Q.
$\begin{array}{llr} \text {Direct material cost per unit of \( Q \) } &\$10\\ \text { Total estimated manufacturing overhead } &\$100,000\\ \text { Total cost per unit of \( Q \) } &\$65\\ \text {Total estimated machine hours } &200,000\\&\mathrm{MH}\\ \text { Direct labor cost per unit of } \mathrm{Q}&\$20\\\end{array}$

• A) 35 MH per unit of Q.
• B) .50 MH per unit of Q.
• C) 70 MH per unit of Q.
• D) 17.5 MH per unit of Q.
• E) 30 MH per unit of Q.

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Definitions:

Debt-Equity Ratio

A financial indicator showing the relationship between borrowed funds and equity in a company's asset financing.

Taxable Income

The portion of an individual's or company's income used to determine how much tax will be owed to the government.

Interest Tax Shield

The reduction in income taxes that results from taking an allowable deduction for interest expenses.

Interest Tax Shield

The decrease in income taxes that occurs by subtracting a permitted deduction, like debt interest, from taxable income.