Answered: Budgeted overheads $690,480 Budgeted…

Budgeted overheads $690,480 Budgeted machine hours 15,344 Actual machine hours 14,128 Actual overheads $679,550 Based on the data above, what is the machine hour absorption rate (to the nearest $)?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 2EB: Boarders estimates overhead will utilize 160,000 machine hours and cost $80,000. It takes 4 machine...

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Budgeted overheads $690,480

Budgeted machine hours 15,344

Actual machine hours 14,128

Actual overheads $679,550

Based on the data above, what is the machine hour absorption rate (to the nearest $)?

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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