5 If machine operating hours are used as the allocation for

5. If machine operating hours are used as the allocation for the following project. A total of $700,000 is allocated to the company for next year. Use the data collected this year to determine the indirect cost rate for each assembly line. Option Indirect cost Estimated Allocated, S Operating Hours 120,000 50,000 175,000 255,000 600 500 1000 I500

Solution

the following is the calculation of indirect cost rate for each assembly line.

option	indirect cost allocated, $	estimated operatin hours	indirect cost rate = (cost allocate / hours)
1	120,000	600	(120,000/600) =>$200 per hour
2	150,000	500	(150,000/500)=>$300 per hour
3	175,000	1000	(175,000/1000)=>$175 per hour
4	255,000	1500	(255,000/1500)=>$170 per hour