Question

A company uses the departmental overhead rate method. Total overhead costs are $5,000,000. Of this total, the machining department is assigned overhead costs of $4,000,000 and the assembly department is allocated the remainder. The machining department uses machine hours as their allocation base and has 80,000 machine hours. The assembly department uses direct labor hours as their allocation base and has 50,000 direct labor hours. Calculate the overhead rate for the machining department. Multiple choice question. $62.50 per machine hour $50.00 per machine hour $20.00 per direct labor hour $100.00 per direct labor hour

Answer 1

Allocation rate Machining= $50 per machine hour

Step-by-step explanation:

Giving the following information:

Estimated Machining cost= $4,000,000

Estimated Number of machine hours= 80,000

To calculate the allocation rate for the Machining department, we need to use the following formula:

Allocation rate Machining= total estimated costs for the period/ total amount of allocation base

Allocation rate Machining= 4,000,000 / 80,000

Allocation rate Machining= $50 per machine hour