Hickingbottom Corporation has two production departments, Forming and Finishing.

Question

Hickingbottom Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department’s predetermined overhead rate is based on machine-hours and the Finishing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

During the current month the company started and finished Job M381. The following data were recorded for this job:

The predetermined overhead rate for the Forming Department is closest to:

Multiple Choice

$5.70 per machine-hour

$7.70 per machine-hour

$2.00 per machine-hour

$18.70 per machine-hour

Forming Finishing Machine-hours 17,000 15,000 Direct labor-hours 1,000 7,000 Total fixed manufacturing overhead cost $ 96,900 $ 65,800 Variable manufacturing overhead per machine-hour $ 2.00 Variable manufacturing overhead per direct labor-hour $ 3.60

Explanation / Answer

Total Fixed Manufacturing Overhead Cost 96900 Machine Hour for Forming Department 17000 Machine Hour Fixed Overhead per machine hour =96900/17000 5.7 Variable Overhead rate per machine hour 2 Therefore predetermined overhead rate per machine hour for forming department =5.7+2 7.7 Note: Best efforts have been made to answer the question correctly. In case of any descrepencies kindly comment, I will try to resolve the same Please provide positive feedback

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