Camm Corporation has two manufacturing departments--Forming and Assembly. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. The departmental predetermined overhead rate in the Assembly Department is closest to:

Question

Camm Corporation has two manufacturing departments--Forming and Assembly. The company used the following data at the beginning of the year to calculate predetermined overhead rates:  Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. The departmental predetermined overhead rate in the Assembly Department is closest to:

Quizplus · Accepted Answer

To calculate the predetermined overhead rate for each department, we need to divide the estimated annual overhead costs by the estimated annual machine-hours in each department.

For the Forming Department: 
Predetermined overhead rate = $427,500 / 85,500 machine-hours = $5.00 per machine-hour

For the Assembly Department: 
Predetermined overhead rate = $306,000 / 63,750 machine-hours = $4.80 per machine-hour

Therefore, the closest choice to the departmental predetermined overhead rate in the Assembly Department is C) $4.80.

Camm Corporation Has Two Manufacturing Departments--Forming and Assembly