Riverview Company's budget for the coming year includes $6,000,000 for manufacturing overhead, 50,000 hours of direct labor, and 250,000 hours of machine time. If Riverview applies overhead using a predetermined rate based on machine-hours, what amount of overhead will be assigned to a unit of output which requires 0.5 machine hours and 0.25 labor hours to complete?Multiple Choice$12.00$16.00$20.00$ 6.00
Question
Riverview Company's budget for the coming year includes 12.0020.00$ 6.00
Solution
To determine the amount of overhead that will be assigned to a unit of output, we need to calculate the predetermined overhead rate based on machine-hours.
First, we divide the total manufacturing overhead budget of $6,000,000 by the total machine hours budgeted, which is 250,000 hours.
24 per machine hour
Now, we can calculate the overhead assigned to a unit of output that requires 0.5 machine hours.
0.5 machine hours * 12
Therefore, the amount of overhead assigned to a unit of output that requires 0.5 machine hours and 0.25 labor hours to complete is $12.
The correct answer is $12.00.
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