Birdstock establishes a static budget at the beginning of each year. Birdstock uses machine hours to...

Birdstock establishes a static budget at the beginning of each year. Birdstock uses machine hours to allocate fixed overhead. Based on the static budget, the budgeted fixed overhead for the year totaled $1,644,000 and the budgeted machine hours totaled 411,000. For May, the actual fixed overhead was $150,000 and the actual machine hours were 15,000. What is the rate that Birdstock will use to apply overhead in May?

Select one:

a. $109.60 per machine hour

b. $4.00 per machine hour

c. None of the choices are correct.

d. $10.00 per machine hour

e. $0.25 per machine hour

Expert Solution

Overhead absroption rate = Total Budgeted expense / Total Budgeted machine hour

Absorption rate = $ 1,644,000/ 411000 = $4 per Machine hour.

Overhead absorption is the amount of indirect costs assigned to cost objects. Indirect costs are costs that are not directly traceable to an activity or product. Cost objects are items for which costs are compiled, such as products, product lines, customers, retail stores, and distribution channels. Overhead absorption is a necessary part of the requirement by both the GAAP and IFRS accounting frameworks to include overhead costs in the recorded amount of inventory that is shown in a company's financial statements. Overhead absorption is not needed for internal management reporting, only for external financial reporting. Examples of indirect costs are:

Selling and marketing costs
Administrative costs
Production costs

ekkarill92 answered 1 year ago

Company uses standard costing. The company prepared its static budget for 2018 at 2,500,000 machine hours...

Company uses standard costing. The company prepared its static budget for 2018 at 2,500,000 machine hours for the year. Total budgeted overhead cost is $33,500,000. The variable overhead rate is $11 per machine hour ($22 per unit). Actual result for 2018 as follow: Machine-hours 2,400,000 hours Output 1,230,000 units Variable overhead $27,600,000 Fixed overhead rate variance $1,350,000 U 1. Calculate for the fixed overhead: a. Budgeted amount. b. Budgeted cost per machine-hour. c. Actual cost. d. Production-volume variance. 2. Calculate...

H Corporation uses a predetermined overhead rate base on machine-hours that it recalculates at the beginning...

H Corporation uses a predetermined overhead rate base on machine-hours that it recalculates at the beginning of each year. The company has provided the following data for the most recent year. Estimated manufacturing overhead from the beginning of the year $ 310,000 Estimated activity level from the beginning of the year 20,000 machine-hours Actual total fixed manufacturing overhead $ 338,000 Actual activity level 18,300 machine-hours The amount of manufacturing overhead that would have been applied to all jobs during the...

Wytch Corporation bases its budgets on machine-hours. The company's static planning budget for February appears below:...

Wytch Corporation bases its budgets on machine-hours. The company's static planning budget for February appears below: Budgeted number of machine-hours 6,000 Budgeted variable costs: Supplies (@ $6.90 per machine-hour) $ 41,400 Power (@ $3.70 per machine-hour) 22,200 Budgeted fixed costs: Salaries 51,600 Equipment depreciation 26,400 Total expense $ 141,600 Required: Prepare a flexible budget for 6,400 machine-hours per month.

Snyder Stampings allocates overhead to products based on machine hours. It uses a flexible overhead budget...

Snyder Stampings allocates overhead to products based on machine hours. It uses a flexible overhead budget to calculate a predetermined overhead rate at the beginning of the year. This rate is used during the year to allocate overhead to the various stampings produced. The following table summarizes operations for the last year: Budgeted fixed overhead $ 3,800,000 Over-absorbed overhead variance $ 220,000 Actual machine hours 46,000 Variable overhead per machine hour $ 100 Actual overhead incurred $ 8,750,000 Required: In...

Webster Manufacturing uses a flexible budget for manufacturing costs based on machine hours. Variable manufacturing costs...

Webster Manufacturing uses a flexible budget for manufacturing costs based on machine hours. Variable manufacturing costs per machine hour are as follows: Indirect labor $5.00 Indirect materials 2.50 Maintenance .50 Utilities .30 Fixed costs per month are: Supervision $1,200 Insurance 400 Property taxes 600 Depreciation 1,800 Part A: The Company believes it will normally operate in a range of 4,000 to 8,000 machine hours per month, selling at a price of $10 per machine hour. Instructions Prepare a flexible budget using increments of 2,000 machine hours within the activity...

Reflector Glass Company prepared the following static budget for the year: Static Budget Units/Volume 6 comma...

Reflector Glass Company prepared the following static budget for the year: Static Budget Units/Volume 6 comma 0006,000 Per Unit Sales Revenue $ 5.00$5.00 $ 30 comma 000$30,000 Variable Costs 1.501.50 9 comma 0009,000 Contribution Margin 21 comma 00021,000 Fixed Costs 4 comma 0004,000 Operating Income/(Loss) $ 17 comma 000$17,000 If a flexible budget is prepared at a volume of 8 comma 9008,900 units, calculate the amount of operating income. The production level is within the relevant range. A. $ 4...

Speedy Bikes Couriers Company prepared the following static budget for the year: Static Budget Units/Volume 6...

Speedy Bikes Couriers Company prepared the following static budget for the year: Static Budget Units/Volume 6 comma 000 Per Unit Sales Revenue $ 5 $ 30 comma 000 Variable Costs 1 6 comma 000 Contribution Margin 24 comma 000 Fixed Costs 4 comma 000 Operating Income/(Loss) $ 20 comma 000 If a flexible budget is prepared at a volume of 7 comma 500, calculate the amount of operating income. The production level is within the relevant range. A. $ 20...

Dagger Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year,...

Dagger Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $393,030. At the end of the year, actual direct labor-hours for the year were 21,200 hours, manufacturing overhead for the year was underapplied by $21,100, and the actual manufacturing overhead was $384,280. The predetermined overhead rate for the year must have been closest to: $18.13 per direct labor-hour $17.13 per direct labor-hour $18.54 per direct labor-hour $17.54 per...

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year,...

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,800 hours and the total estimated manufacturing overhead was $497,040. At the end of the year, actual direct labor-hours for the year were 21,500 hours and the actual manufacturing overhead for the year was $492,040. Overhead at the end of the year was: (Do not round your intermediate calculations.) A) $6,840 overapplied B) $6,840 underapplied C) $1,840 underapplied D)...

Golden Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year,...

Golden Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 22,700 hours. At the end of the year, actual direct labor-hours for the year were 21,500 hours, the actual manufacturing overhead for the year was $557,740, and manufacturing overhead for the year was underapplied by $24,540. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: $552,520. $583,366. $533,200. $562,960.

Question