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Pinnacle Corp. budgeted $700,000 of overhead cost for the current year. Actual overhead costs for the year were $650,000. Pinnacle's plantwide allocation base, machine hours, was budgeted at 100,000 hours. Actual machine hours were 80,000. A total of 100,000 units was budgeted to be produced and 98,000 units were actually produced. Pinnacle's plantwide factory overhead rate for the current year is a.$8.75 per machine hour b.$6.50 per machine hour c.$7.00 per machine hour d.$8.13 per machine hour

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Answer:

The correct answer is C.

Explanation:

Giving the following information:

Pinnacle Corp. budgeted $700,000 of overhead costs for the current year.

Pinnacle's plantwide allocation base, machine hours, was budgeted at 100,000 hours.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 700,000/100,000= $7 per machine-hour.

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Answer:C. $7.00 per machine-hour

Explanation:

PLANT-WIDE FACTORY OVERHEAD RATE = Predetermined overhead cost ÷ predetermined plantwide allocation base

Therefore, Required parameters to calculate plantwide factory overhead rate for the year.

Predetermined overhead cost for the year = $700,000

Predetermined plantwide allocation base (Machine-hours) = 100,000

PLANT-WIDE FACTORY OVERHEAD RATE = $700,000 ÷ 100,000 = $7

$7 PER MACHINE-HOUR

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