Asked by Emily Snoke on Jun 10, 2024
Verified
Technics Inc., a manufacturing company, utilizes job order costing. Each division establishes its own estimates regarding overhead, which are as follows: If Division A allocates overhead on the basis of machine hours and Division B allocates overhead as a percentage of direct labor costs, what would the predetermined overhead rate be for each division?
Job Order Costing
An accounting method used to track the costs associated with producing a specific batch of products or performing a specific job.
Predetermined Overhead Rate
An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a selected cost driver.
Direct Labor Costs
Direct labor costs are the total expenses that a company incurs for labor directly involved in the manufacturing process of its products, including wages and salaries of the production staff.
- Calculate predetermined overhead rates based on different allocation bases.
Verified Answer
$261,000 ÷ $290,000 = 90% of direct labor costs
Learning Objectives
- Calculate predetermined overhead rates based on different allocation bases.
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