QUESTION

Jones Company allocates manufacturing overhead based on machine hours. Each chair produced should require 3 machine hours. According to the static budget, the following is expected to incur:

1,200 machine hours per month (400 chairs x 3 hours per chair) $6,000 in variable manufacturing overhead costs $8,400 in fixed manufacturing overhead costs

During January, Jones Company actually used 1,100 machine hours to make 410 chairs. The company spent $5,800 in variable manufacturing overhead costs and $8,100 in fixed manufacturing overhead costs.

What is the fixed manufacturing overhead allocation rate (to the nearest cent)?

ANSWER

• $4.83 per machine hour

• $7.00 per machine hour

• $5.00 per machine hour

• $6.75 per machine hour

• I DON'T KNOW YET