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28 July, 10:00

The Collins Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on machine hours in Dept. A and labor cost in Dept. B. At the beginning of the year, the company made the following estimates: Dept A Dept B Direct labor cost $65,000 $42,000 Manufacturing overhead $91,000 $48,000 Direct labor-hours 8,000 10,000 Machine-hours 3,000 12,000 What predetermined overhead rates would be used in Dept A and Dept B, respectively

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  1. 28 July, 10:03
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    Predetermined overhead rate for department A = 1.4

    Predetermined overhead rate for department B = $4

    Explanation:

    The computation of predetermined overhead rates would be used in Dept A and Dept B, is shown below:-

    The predetermined overhead rate for department A = Manufacturing overhead : Machine hours

    = $91,000 : $65,000

    = 1.4

    The predetermined overhead rate for department B = Manufacturing overhead : Machine hours

    = $48,000 : 12,000 hours

    = $4

    So, we have applied the above formula.
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