Sanilac County has a lease on a lawn mower for $2500 per month and $.02 per minu

Question

Sanilac County has a lease on a lawn mower for $2500 per month and $.02 per minute of operation. Operating costs for fuel, oil, technicians, and so on are all variable at $.03 per minute. Departments had projected a need for 100,000 minutes per month. The county planning department predicted its usage at 36,000 minutes per month. The lawn mower was actually operated 42,000 minutes in 2011.
--Calculate one predetermined rate per minute to allocate all lawnmower usage. How much should be allocated to the city department this month?

Explanation / Answer

Total Overheads = $2,500 + ($0.02 + $0.03) * 100,000 minutes Total Overheads $7,500.00 Predetermined Overhead Rate = Total Overheads / Budgeted minutes Predetermined Overhead Rate = $7,500 / 100,000 minutes Predetermined Overhead Rate $0.08 Overheads Allocated = 42,000 minutes * $0.08 Overheads Allocated $3,150.00

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