Question

The Collins Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on machine hours in Dept. A and labor cost in Dept. B. At the beginning of the year, the company made the following estimates: Dept A Dept B Direct labor cost $65,000 $42,000 Manufacturing overhead $91,000 $48,000 Direct labor-hours 8,000 10,000 Machine-hours 3,000 12,000 What predetermined overhead rates would be used in Dept A and Dept B, respectively

Answer 1

Predetermined overhead rate for department A = 1.4

Predetermined overhead rate for department B = $4

Step-by-step explanation:

The computation of predetermined overhead rates would be used in Dept A and Dept B, is shown below:-

The predetermined overhead rate for department A = Manufacturing overhead ÷ Machine hours

= $91,000 ÷ $65,000

= 1.4

The predetermined overhead rate for department B = Manufacturing overhead ÷ Machine hours

= $48,000 ÷ 12,000 hours

= $4

So, we have applied the above formula.