Question

The Silver Corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Department A and on machine-hours in Department B. At the beginning of the year, the Corporation made the following estimates: Department A Department B Direct labor cost $ 60,000 $ 40,000 Manufacturing overhead $ 90,000 $ 45,000 Direct labor-hours 6,000 9,000 Machine-hours 2,000 15,000 What predetermined overhead rates would be used in Department A and Department B, respectively?

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Department A:

Direct labor cost= $60,000

Manufacturing overhead= $90,000

Department B:

Manufacturing overhead= $45,000

Machine-hours= 2,000

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Department A:

Predetermined manufacturing overhead rate= 90,000/60,000

Predetermined manufacturing overhead rate= $1.5 per direct labor dollar

Department B:

Predetermined manufacturing overhead rate= 45,000/2,000= $22.4 per machine-hour