Question

Well tool, inc., a manufacturer of welding tools, divided its manufacturing process into two departments machining and finishing. The estimated overhead costs for the machining and finishing departments were 800,000 and8,760,000 respectively. The company produces two types of tools: standard and deluxe. The machining department is mechanized, whereas the finishing department is labor-oriented. Calculate the department predetermined overhead allocation rate for the machining department using machine hours as the allocation base. (Round answer to the nearest cent.)

Answer 1

The predetermined overhead allocation rate for Well Tool, Inc.'s machining department using machine hours cannot be calculated without the total number of machine hours. The formula requires both the estimated overhead costs and the total machine hours to determine the rate, which is used to allocate overhead costs based on production machine hours.

Step-by-step explanation:

The question asks to calculate the predetermined overhead allocation rate for Well Tool, Inc.'s machining department, using machine hours as the allocation base. To calculate this, we need to know the total estimated overhead costs for the department and the total number of machine hours expected to be used during the period. However, the provided information does not include the number of machine hours, so we cannot compute the rate. To arrive at the predetermined overhead allocation rate under normal circumstances, you would divide the estimated overhead costs of the machining department by the total machine hours. The formula is as follows:

Predetermined Overhead Rate = Estimated Overhead Costs / Total Machine Hours

Without the total machine hours, we would be unable to provide the overhead allocation rate. Once the total machine hours are established, the company can then use the calculated predetermined overhead rate to apply overhead costs to products more accurately based on the machine hours they consume during production.