The Roan plant of the Texas Company has two production departments: Extrusion an
ID: 2374652 • Letter: T
Question
The Roan plant of the Texas Company has two production departments: Extrusion and
Assembly. The plant produces two products: P and Q. Cost information for the production departments
is given below:
Extrusion $360,000
Assembly 750,000
The following table presents activity information about the departments and products:
Extrusion Assembly Total
Direct labor hours:
P 10,000 20,000 30,000
Q 10,000 30,000 40,000
Total 20,000 50,000 70,000
Machine hours:
P 5,000 1,000 6,000
Q 15,000 2,000 17,000
Total 20,000 3,000 23,000
Required:
a. Compute the predetermined overhead rate for each department if Extrusion uses machine hours and Assembly uses labor hours
Explanation / Answer
Predetermined overhead rate for each department :
Extrusion Department ' s Predetermined Overhead rate = 360000/20000 = $18 per Mhr
Assembly Department ' s Predetermined Overhead rate = 750000/50000 = $15 per DLhr
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