The Silver Corporation uses a predetermined overhead rate to apply manufacturing
ID: 2414800 • Letter: T
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?
A) 67% and $3.00
B) 150% and $5.00
C) 150% and $3.00
D) 67% and $5.00
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
Explanation / Answer
Answer
c ) 150 % and 3.00
dep A = manufacturing overhead * 100 / direct labour cost
= 90000 * 100 / 60000
= 150 %
dep B = manufacturing overhead / machine hour
= 45000 / 15000
= 3 per machine
hences = 150 % and 3.00
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