Vanliere Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Finishing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: During the current month the company started and finished Job A803. The following data were recorded for this job:
The predetermined overhead rate for the Finishing Department is closest to:

Question

Vanliere Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Finishing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:  During the current month the company started and finished Job A803. The following data were recorded for this job:
 The predetermined overhead rate for the Finishing Department is closest to:

Quizplus · Accepted Answer

Finishing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $52,800 + ($3.80 per direct labor-hour × 6,000 direct labor-hours)
= $52,800 + $22,800 = $75,600
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $75,600 ÷ 6,000 direct labor-hours = $12.60 per direct labor-hour

Vanliere Corporation Has Two Production Departments, Machining and Finishing