Question

Jurica Corporation has two production departments, Forming and Customizing. 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 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: Forming Customizing Machine-hours 19,000 15,000 Direct labor-hours 4,000 6,000 Total fixed manufacturing overhead cost $ 100,700 $ 63,000 Variable manufacturing overhead per machine-hour $ 2.00 Variable manufacturing overhead per direct labor-hour $ 3.90 The predetermined overhead rate for the Forming Department is closest to:

A. $23.12 per machine-hour
B. $5.30 per machine-hour
C. $2.00 per machine-hour
D. $7.30 per machine-hour

Answer 1

Answer:

D. $7.30 per machine hour

Explanation:

The computation of Overhead Per Machine Hour is shown below:-

Overhead Per Machine Hour = Fixed Cost + Variable Overhead Cost ÷ Number of hours

= ($100,700 + (19,000 × $2)) ÷ 19,000

= ($100,700 + $38,000) ÷ 19,000

= $138,700 ÷ 19,000

= $7.30 per machine hour

So, for computing the Overhead Per Machine Hour we simply applied the above formula.