accounting
6. Acme Manufacturing Company estimates factory overhead as a percentage of machine hours. On 1.1.11, Acme estimates total factory overhead of $400,000 for the year, and estimates 20,000 machine hours will be required during the year. During the year, 10,000 units of product are produced and sold, total factory overhead totaled $410,000 and 21,000 machine hours were used. Prime costs placed into production during the year totaled $500,000.
How much factory overhead was applied per machine hour? $__________
In total, how much factory overhead was applied during the year? $__________
What is the normal cost of the units produced? $__________
What is the actual cost of the units produced? $__________
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Answers
The factory overhead applied per machine hour is $19.52 ($410,000/21,000 machine hours). In total, $410,000 of factory overhead was applied during the year. The normal cost of the units produced is $25 ($500,000/20,000 machine hours x 10,000 units). The actual cost of the units produced is $41 ($410,000/21,000 machine hours x 10,000 units). This is higher than the normal cost of the units produced because actual factory overhead was $410,000 while the estimated overhead was $400,000.
