If an overhead cost of operating a machine is $500000 for 1000 hours, then the cost allocation rate will be ____________?
Correct answer: C. $500 per machine hour
- A. $1500 per machine hour
- B. $250 per machine hour
- C. $500 per machine hour
- D. $1000 per machine hour
Explanation
The allocation rate is calculated as total overhead divided by machine hours: $500,000 ÷ 1,000 = $500 per machine hour. This rate assigns overhead to products according to the machine time they use.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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