Green Bags Company manufactures cloth grocery bags to be sold to grocery stores

Question

Green Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Green Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizesLarge, Medium, and Small. Currently, Green Bags Company uses a single plantwide overhead rate to allocate its $7,141,100 of annual manufacturing overhead. Of this amount, $1,875,000 is associated with the Large Bag line, $2,992,500 is associated with the Medium Bag line, and $2,273,000 is associated with the Small Bag line. Green Bags Company is currently running a total of 37,000 machine hours12,500 in the Large Bag line, 13,300 in the Medium Bag line, and 11,200 in the Small Bag line. Green Bags Company uses machine hours as the cost driver for manufacturing overhead costs.

The plant-wide manufacturing overhead rate would be closest to:

Explanation / Answer

Green Bags Company Total Manufacturing Overhead      7,141,100 Total Machine Hours              37,000 Predetermined plantwide Manufacturing Overhead rate per Machine Hours $        193.00

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