Question

QUESTION 19 For 2019, Al Ain Manufacturing uses machine-hours as the only overhead cost-allocation base. The accounting records contain the following information: Estimated Actual Manufacturing overhead costs $100,000 $120,000 Machine-hours 20,000 25,000 Using job costing, the amount of manufacturing overhead costs allocated to jobs during 2019 is: $150,000 $125,000 $120,000 $100,000

Answer 1

Answer for the above question is (b) $125,000

Explanation -

Since Company is using machine hours as the allocation base, we will use the estimated machine hours to calculate our allocation rate.

We will proceed as follows -

In order to calculate the allocated manufacturing overhead for the year, first we will see what is the expected manufacturing overhead for the year.

By the question details it is clear that Estimated Manufacturing Overhead costs for the year are - $100,000

Now we need a base, through which we need to determine the rate of overhead per machine hour.

Estimated Machine Hours for the year 20,000 hours.

Dividing Estimates Manufacturing Overhead / Estimated Machine hours

It will give the overhead allocation rate of per hour.

Solving ---

USD 100,000 / 20,000 hrs

we get - $5 per hour

Now for the year we have our actual machine hours as 25,000 hrs.

We can now easily find the allocated manufacturing overhead by multiplying the determined rate with the actual machine hours -

therefore, 25,000 hrs * 5 USD per hr

we get

= $125,000

So our answer for the above MCQ is Option B i.e. USD 125,000

Kindly comment in case of any questions.

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