Deloria Corporation has two production departments, Forming and Assembly. The co

Question

Deloria Corporation has two production departments, Forming and Assembly. 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 Assembly 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 T288. The following data were recorded for this job:

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

Multiple Choice

$3.00 per direct labor-hour

$12.70 per direct labor-hour

$9.70 per direct labor-hour

$5.35 per direct labor-hour

Forming Assembly Machine-hours 19,000 15,000 Direct labor-hours 4,000 8,000 Total fixed manufacturing overhead cost $ 129,200 $ 77,600 Variable manufacturing overhead per machine-hour $ 1.60 Variable manufacturing overhead per direct labor-hour $ 3.00

Explanation / Answer

B. $12.70 per direct labor-hour

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

= [$77,600 + (8,000 * $3.00)] / 8,000

= $12.70 per direct labor-hour

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