Homework SourseRed Raider Company uses a plantwide overhead rate with machi
Red Raider Company uses a plantwide overhead rate with machine hours as the allocation base. Next year, 400,000 units are expected to be produced requiring 1.2 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?
| Estimated: | Department 1 | Department 2 | ||||
| Manufacturing overhead costs | $ | 2,530,000 | $ | 2,752,000 | ||
| Direct labor hours | 168,000 | DLH | 110,000 | DLH | ||
| Machine hours | 30,000 | MH | 8,000 | MH | ||
Solution
Overhead that will be assigned to each unit produced:
= [($2,530,000 + $2,752,000)/(30,000 + 8,000)] × 1.2
= $139 × 1.2
= $166.80 per unit
