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

A) $5.84 per direct labor-hour
B) $3.60 per direct labor-hour
C) $11.00 per direct labor-hour
D) $14.60 per direct labor-hour

Question

The predetermined overhead rate for the Finishing Department is closest to:A) $5.84 per direct labor-hourB) $3.60 per direct labor-hourC) $11.00 per direct labor-hourD) $14.60 per direct labor-hour

Alexander Wilson · Accepted Answer

Final Answer : D, Explanation :  The predetermined overhead rate is calculated by dividing the estimated total overhead costs for the department by the estimated total direct labor-hours for the department. Using the information given in the question, the calculation is:$292,000 / 20,000 direct labor-hours = $14.60 per direct labor-hour.Therefore, the closest option is D. Finishing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)= $88,000 + ($3.60 per direct labor-hour × 8,000 direct labor-hours)= $88,000 + $28,800 = $116,800Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $116,800 ÷8,000 direct labor-hours = $14.60 per direct labor-hourReference: CH02-Ref44Garza Corporation has two production departments, Casting and Customizing.The company uses a job-order costing system and computes a predetermined overhead rate in each production department.The Casting 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:

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

A) $5.84 per direct labor-hour
B) $3.60 per direct labor-hour
C) $11.00 per direct labor-hour
D) $14.60 per direct labor-hour

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