Asked by Aline Rugira on May 27, 2024
Verified
Deloria Corporation has two production departments, Forming and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Assembly Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: During the current month the company started and finished Job T288. The following data were recorded for this job:
The predetermined overhead rate for the Assembly Department is closest to:
A) $3.00 per direct labor-hour
B) $12.70 per direct labor-hour
C) $9.70 per direct labor-hour
D) $5.35 per direct labor-hour
Assembly Department
A section of a manufacturing firm where products or components are assembled before final packaging or shipping.
Predetermined Overhead Rate
A rate used to apply manufacturing overhead to products or job orders, calculated before the period begins based on estimated costs and activity levels.
Direct Labor-Hours
Overall work duration of employees directly involved in the production process.
- Calculate established overhead rates for assorted production units.
Verified Answer
Predetermined overhead rate = Estimated overhead / Estimated machine-hours = $98,560 / 8,600 = $11.45 per machine-hour
Overhead applied to Job T288 in the Forming Department = $11.45 per machine-hour x 2,100 machine-hours = $24,045
To determine the overhead applied to Job T288 in the Assembly Department, we multiply the predetermined overhead rate by the actual direct labor-hours used:
Predetermined overhead rate = Estimated overhead / Estimated direct labor-hours = $142,560 / 14,800 = $9.62 per direct labor-hour
Overhead applied to Job T288 in the Assembly Department = $9.62 per direct labor-hour x 2,500 direct labor-hours = $24,050
Therefore, the predetermined overhead rate for the Assembly Department is closest to $9.70 per direct labor-hour (choice C is close but not exact).
Learning Objectives
- Calculate established overhead rates for assorted production units.
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