Lake erie company uses a plantwide overhead rate with machine hours as the allocation base. next year, 600,000 units are expected to be produced taking .75 machine hours each. how much overhead will be assigned to each unit produced given the following estimated amounts?
estimated:
department 1 department 2
manufacturing overhead costs $ 3,107,500 $ 1,520,000
direct labor hours 150,000 dlh 250,000 dlh
machine hours 250,000 mh 175,000 mh
$11.57 per unit $8.17 per unit $5.61 per unit $12.43 per unit $10.89 per unit

8.17 rate per unit

Explanation:

The company will be using a plantwide rate so we have  to add the manufacturing overhead cost

3,107,500  +  1,520,000.00  = 4,627,500.00  overhead cost

and now distribute over the cost driver which is the machine hours

250,000  + 175,000.00  = 425,000.00  total machine hours

4,627,500/425,000 = 10.88823529 rate per machine hours

Notice we are  asked for the unit rate so we multiply the rate per machine hours by the amount of hours ittakes to do a single unit:

10.88823529 * 0.75 = 8.166176 = 8.17 rate per unit

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