Question

The Silver Corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine-hours in Dept. B. At the beginning of the year, the Corporation made the following estimates: Dept. A Dept. B Direct labor cost $ 60,000 $ 40,000 Manufacturing overhead $ 90,000 $ 45,000 Direct labor-hours 6,000 9,000 Machine-hours 2,000 15,000 What predetermined overhead rates would be used in Dept. A and Dept. B, respectively? Question 8 options: A) 67% and $5.00 B) 150% and $3.00 C) 67% and $3.00 D) 150% and $5.00 7 of 8 questions saved

Answer 1

Answer:

B. 150% and $3

Explanation:

Department A

= Manufacturing overhead × 100 / Direct labor cost

= $90,000 × 100 / $60,000

= 150%

Department B

= Manufacturing overhead / Machine hour

= $45,000 / 15,000

= $3 per machine hour

Hence, the predetermined overhead rate used in Department A = 150% , Department B = $3