The Westfield Company uses predetermined overhead rates to applymanufacturing ov
ID: 2434091 • Letter: T
Question
The Westfield Company uses predetermined overhead rates to applymanufacturing overhead to jobs. The predetermined overhead rate isbased on machine hours in Department #1 and direct labor cost inDepartment #2 and at the beginning of the year, the company madethe following estimates:
Particulars
Dept #1 (Rs.)
Dept #2 (Rs.)
Direct labor cost
20,000
15,000
Manufacturing overhead
25,000
30,000
Direct labor hours
16,000
12,000
Machine hours
5,000
1,000
What predetermined overhead rates would be used in Department #1and Department #2, respectively?
Particulars
Dept #1 (Rs.)
Dept #2 (Rs.)
Direct labor cost
20,000
15,000
Manufacturing overhead
25,000
30,000
Direct labor hours
16,000
12,000
Machine hours
5,000
1,000
Explanation / Answer
Predetermined overhead Rates for Department 1 = Rs.25,000 / 5,000 = Rs. 5 per machine hour Predetermined overhead Rates for Department 2 = Rs.30,000 / Rs.15,000 = 200% of direct labor cost
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