Question

Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2020, the following estimates were made for the year. Manufacturing overhead Direct labor costs Direct labor hours Machine hours Department к $784,000 $1,500,000 $780,000 $1,120,000 $1,250,000 $450,000 100,000 125,000 40,000 400,000 500,000 120,000 During January, the job cost sheets showed the following costs and production data. Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours Machine hours Department DEK $140,000 $126,000 $78,000 $120,000 $110,000 $37,500 $99,000 $124,000 $79,000 8,000 11,000 3,500 34,000 45,000 10,400 (a) Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, eg. 12.50 or 12.50%.) Overhead rate Department D Department E $ per direct labor hour Department K $ per machine hour

Answer 1

Answer :- Computation of predetermined overhead rate for each department:-

1. Department D = Manufacturing Overhead / Direct labor costs

Department D = $784,000 / $1,120,000

Department D = 70%

2. Department E = Manufacturing Overhead / Direct labor hours

Department E = $1,500,000 / 125,000

Department E = $12 per direct labor hour

3. Department K = Manufacturing Overhead / Machine hours

Department K = $780,000 / 120,000

Department K = $6.5 per machine hour

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