Sharon has decided to try and calculate her Manufacturing Overhead (MOH) allocation with a departmental rate rather than using a plant-wide rate. She works for Seashell, Inc., a factory that produces seashell-themed keychains. She is looking at the costs derived from the production department and the department's total budgeted costs include: Factory Utilities, $66,000; Factory Supervisor Salaries, $100,000; Assembly Line Worker Wages, $284,000; Maintenance Wages, $32,000; Seashells, $15,000; Metal for Keychains, $7,000; and Factory Depreciation, $54,000. What is the budgeted departmental MOH rate based on Direct Labor (DL) cost?
A) $0.21
B) $0.89
C) $4.67
D) $11.45

Question

Quizplus · Accepted Answer

This question requires that you calculate the budgeted MOH rate using the formula of total MOH costs in department's cost pool divided by the total quantity of department's cost driver. This calculation is ($66,000 + $100,000 + $32,000 + $54,000)/$284,000 = $252,000/$284,000 = $0.89 (Choice B).

Sharon Has Decided to Try and Calculate Her Manufacturing Overhead