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:

Investment Required

The total amount of capital needed to start or expand a business or project, encompassing all necessary expenses.

Annual Cash Inflows

The total amount of money received by a business within one fiscal year from its operations, investments, and financing activities.

Salvage Value

The estimated residual value of an asset at the end of its useful life, considered for depreciation calculations.

Working Capital Investment

Funds used by a company to finance its day-to-day operations, including investments in inventory and accounts receivable.