Question

Assuming that overhead in the machining department is allocated on the basis of machine hours, and overhead in the assembly department is allocated on the basis of direct labor cost, the departmental overhead rates per unit of the related allocation bases in the Machining and Assembly Departments respectively will be:110% and $15.00.$5.00 and 50%.$5.00 and 200%.$8.00 and 50%

Answer 1

Question

The complete question is as follows:

Machining Assembly

Direct Labour 16,000 12,000

Direct labour cost 20,000 15,000

Machine hours 5,000 1,000

Overhead($) 25,000 30,000

Answer

Machining Assembly

Overhead absorption rate = $5 per hour 200% of labour cost

Step-by-step explanation:

Overhead absorption rate is used to charged overheads to output achieved. It is calculated as follows:

OAR = Budgeted overhead / Budgeted activity

Machining Assembly

Overhead absorption rate 25,000/5000 hrs 30,000/15000 × 100

= $5 per hour 200% of labour cost