Question

Question 5 of 5 0.44/4 5 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. Department K Manufacturing overhead Direct labor costs Direct labor hours Machine hours D $1.240,000 $1,550,000 120,000 480,000 AC $1,625,000 $1,500,000 125.000 600,000 $1,020,000 $540,000 48,000 120,000 QE ACC During January, the job cost sheets showed the following costs and production data. Vic Асса Department D Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours $168,000 $144,000 $118,800 9.600 $151,200 $132.000 $148,800 13.200 DO к $93.600 $45,000 $94,800 4,200 ABO

Answer 1

Answer:

Overhead rate
Department D	80	%
Department E	$13	per direct labor hour
Department K	$ 8.50	per machine hour

Calculation:

To calculate the predetermined overhead rate, we need to take the Manufacturing overhead and then divide it by the respective basis. Here, Manufacturing overhead is applied to jobs on the basis of direct labor overhead rates, apply cost in Department D, direct labor hours in Department E, and machine hours in overhead Department K.

So,

Department D:

Predetermined overhead rate = Manufacturing overhead/ Direct labor costs

= $1,240,000/$1,550,000 = 80% direct cost

Department E:

Predetermined overhead rate = Manufacturing overhead/ Direct labor hours

= $1,625,000/125,000 = $13 per direct labor hours

Department K:

Predetermined overhead rate = Manufacturing overhead/ Machine hours

= $1,020,000/120,000 = $8.50 per machine hour