West Company estimates that overhead costs for the next year will be $5,240,000 for indirect labor and $550,000 for factory utilities. The company uses machine hours as its overhead allocation base. If 150,000 machine hours are planned for this next year, what is the company's plantwide overhead rate?
A) $.0259 per machine hour.
B) $34.93 per machine hour.
C) $38.60 per machine hour.
D) $3.67 per machine hour.
E) $.2727 per machine hour.
C) $38.60 per machine hour.
Explanation: ($5,240,000 + $550,000)/150,000 machine hours = $38.60 per machine hour
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