The silver corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. the predetermined overhead rate is based on labor cost in dept. a and on machine-hours in dept. b. at the beginning of the year, the corporation made the following estimates:
dept. a dept. b direct labor cost $60,000 $40,000 manufacturing overhead $90,000 $45,000 direct labor-hours 6,000 9,000 machine-hours 2,000 15,000
what predetermined overhead rates would be used in dept. a and dept. b, respectively?
(a) 67% and $3
(b) 67% and $5
(c) 150% and $3

Option (C) is correct.

Explanation:

Given that,

In Dept. A,

Direct labor cost = $60,000

Manufacturing overhead = $90,000

Direct labor-hours = 6,000

Machine-hours = 2,000

In Dept. B,

Direct labor cost = $40,000

Manufacturing overhead = $45,000

Direct labor-hours = 9,000

Machine-hours = 15,000

Predetermined overhead rates in Dept. A =

                                                                       =

                                                                       = 150%

In dept. B =

                =

                = $3

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