Question

Dotsero Technology, Inc. has a job-order costing system. The company uses predetermined overhead rates Iin apply manufacturing overhead cost to individual jobs. The predetermined overhead rate in department A is based on machine-hours, and the rate in department B is based on direct material cost. At the beginning of the most recent year, the company's management made the following estimates for the year:Department A Department BMachine-hours............................ 70,000 19,000Direct labor-hours........................ 30,000 60,000Direct materials cost..................... 195,000 282,000Direct labor cost.......................... 260,000 520,000Manufacturing overhead cost............ 420,000 705,000Compute the predeterminded overhead rates for department A and department B.

Answer 1

Dept. A Dept. B

Machine hours 70,000

Direct Material Cost 282,000

Manufacturing overhead 420,000 705,000

Predetermined OH rate 420,000 / 70,000 705,000/282,000

= 6.00 per MH = 2.50 per dollar of DM cost