Question

Fatzinger Corporation has two production departments, Milling and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling 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:

Milling Assembly
Machine—hours 20,000 14,000
Direct labor—hours 2,000 7,000
Total fixed manufacturing Overhead cost $137,000 $57,400
Variable manufacturing overhead per machine—hour $2.30
Variable manufacturing overhead per direct labor—hour $3.40

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

Answer 1

Answer:

$11.60 per direct labor-hour

Explanation:

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

First step is to calculate the Assembly Department overhead cost

Assembly Department overhead cost= $57,400 + ($3.40 per direct labor-hour × 7,000 direct labor-hours)

Assembly Department overhead cost= $57,400 + $23,800

Assembly Department overhead cost = $81,200

Now let calculate the Predetermined overhead rate

Predetermined overhead rate = $81,200 ÷7,000 direct labor-hours

Predetermined overhead rate = $11.60 per direct labor-hour

Therefore The predetermined overhead rate for the Assembly Department is closest to:$11.60 per direct labor-hour