Eisentrout Corporation has two production departments, Machining and Customizing

Question

Eisentrout Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department’s predetermined overhead rate is based on machine-hours and the Customizing 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 T272. The following data were recorded for this job:

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

Multiple Choice

$22.93 per machine-hour

$6.50 per machine-hour

$2.10 per machine-hour

$8.60 per machine-hour

Machining Customizing Machine-hours 16,000 11,000 Direct labor-hours 2,000 6,000 Total fixed manufacturing overhead cost $ 104,000 $ 56,400 Variable manufacturing overhead per machine-hour $ 2.10 Variable manufacturing overhead per direct labor-hour $ 3.30

Explanation / Answer

Total Fixed Manufacturing Overhead Cost 104000 Machine Hour for Machining Department 16000 Machine Hour Fixed Overhead per machine hour =104000/16000 6.5 Variable Overhead rate per machine hour 2.1 Therefore predetermined overhead rate per machine hour for Machining department =6.5+2.1 8.6 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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