Compute Aztec\'s departmental overhead rate for the baking department based on m

Question

Compute Aztec's departmental overhead rate for the baking department based on machine hours.

What is the company's plantwide overhead rate if machine hours are the allocation base?
(Round to two decimal places.)

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below.
Mixing Baking Direct labor hours 400,000 DLH 80,000 DLH Machine hours 800,000 MH 800,000 MH Overhead costs $600,000 $400,000

Compute Aztec's departmental overhead rate for the baking department based on machine hours.

The following data relates to Black-Out Company's estimated amounts for next year.
Estimated: Department 1 Department 2 Manufacturing overhead costs $300,000 $400,000 Direct labor hours 60,000 DLH 80,000 DLH Machine hours 1,000 MH 2,000 MH

What is the company's plantwide overhead rate if machine hours are the allocation base?
(Round to two decimal places.)

Explanation / Answer

Aztec's departmental overhead rate for the baking department based on machine hours=

= Total Budgeted Overhead Cost for baking department / Total machine Hours of baking department

= $400,000 / 800,000 MH

= $ 0.50 per machine hour

Hence, the correct answer is  $ 0.50 per machine hour

The company's plantwide overhead rate if machine hours are the allocation base =

= Total Budgeted Overhead Cost / Total machine Hours

= ( $ 600,000 + $ 400,000 ) / ( 800,000 MH + 800,000 MH)

= $ 0.625 per machine hour

Hence, the correct answer is $ 0.63 per machine hour

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