At the start of the year, Vencor Company estimated manufacturing overhead to be $2,000,000. Eighty percent of
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At the start of the year, Vencor Company estimated manufacturing overhead to be $2,000,000. Eighty percent of the overhead is fixed and relates to depreciation of equipment. The remaining 20 percent is variable. The company estimated machine hours to be 100,000 and thus used a predetermined overhead rate of $20 per machine hour. During the year, the company devised a new way to sequence movements of material among the machines, which resulted in a savings of 30,000 machine hours.
Required Estimate the amount of manufacturing overhead that the company would save related to the reduction in machine hours. Why is the savings less than $20 per machine hour?
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Estimated manufacturing overhead was 2000000 and eighty percent was fixed When the seque...View the full answer
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