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 sizes–Large, Medium, and Small. Currently, Green Bags Company uses a single plant-wide 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 $2,273,600 is associated with the Small Bag line. Green Bags Company is currently running a total of 37,000 machine hours–12,500 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
◦ $50.68 per machine hour.
◦ $193.00 per machine hour.
◦ $225.00 per machine hour.
◦ $150.00 per machine hour.
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