Garza Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing 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: The estimated total manufacturing overhead for the Customizing Department is closest to:

Question

Garza Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing 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:  The estimated total manufacturing overhead for the Customizing Department is closest to:

Quizplus · Accepted Answer

Customizing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $68,600 + ($4.30 per direct labor-hour × 7,000 direct labor-hours)
= $68,600 + $30,100 = $98,700

Garza Corporation Has Two Production Departments, Casting and Customizing