Question

Big Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:

​	Machining Department	Finishing Department
Estimated Manufacturing Overhead by Department	$1,000,000	$100,000
Trail Running Shoes	130,000 machine hours	9000 direct labor hours
Running Apparel	70,000 machine hours	71,000 direct labor hours

Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department. Based on this information, what is the departmental manufacturing overhead rate for the machining and finishing department, respectively? (Round any intermediary calculations and your final answer to the nearest cent.)

		$5.50 per machine hour and $13.75 per direct labor hour
		$5.00 per machine hour and $1.25 per direct labor hour
		$14.29 per machine hour and $11.11 per direct labor hour
		$7.69 per machine hour and $1.41 per direct labor hour

Answer 1

Departmental overhead rate = Total Overheads/Total Hours

Machining Department = 1,000,000/(130,00+70,000)

= $5 per machine hour

Finishing Department = 100,000/(9000+71000)

= $1.25 per Labor hour

Hence, the answer is

$5.00 per machine hour and $1.25 per direct labor hour