Question

Bronzit Company estimated the following at the beginning of the year: Assembly Department Testing Department Total Overhead $700,000 $100,000 $800,000 Direct Labor Hours 150,500 hrs. 40,500 hrs. 191,000 hrs. Machine Hours 37,000 hrs. 72,000 hrs. 109,000 hrs. Bronzit uses departmental overhead rates. In the assembly department, direct labor hours are used to apply overhead. Machine hours are used to apply overhead in the testing department. Actual data for the month of May is as follows: Assembly Department Testing Department Total Overhead $50,000 $11,000 $61,000 Direct Labor Hours 20,000 hrs. 2,500 hrs. 22,500 hrs. Machine Hours 3,500 hrs. 14,000 hrs. 17,500 hrs. If Bronzit uses a plant wide overhead rate based on direct labor hours, instead of departmental rates, what is the predetermined overhead rate rounded to the nearest cent? a.$4.19 per direct labor hour b.$8.65 per direct labor hour c.$4.50 per direct labor hour d.$0.33 per direct labor hour e.$5 per direct labor hour

Answer 1

The correct answer is A: $4.19 per direct labor hour

Step-by-step explanation:

Giving the following information:

Assembly Department

Overhead $700,000

Direct Labor Hours 150,500 hrs

Testing Department

Overhead $100,000

Machine Hours72,000 hrs

Direct Labor Hours= 191,000 hrs.

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 800000/191000= $4.19 per direct labor hour