Susan has gathered the following data about the tire factory she manages: the department's total costs are budgeted as follows: Quality Control- $122,000, Property Tax- $18,000, Direct Wages and Salaries, $506,300; Rubber, $87,482; Fabrics, $62,500; Factory Supervisor Salaries, $166,200; and Factory Depreciation, $102,000 all of which have been derived from the production department. Rather than using a plant-wide rate, she will be calculating the Manufacturing Overhead (MOH) allocation with a departmental rate. What is the budgeted MOH rate using a departmental rate based on DL cost?
A) $0.26
B) $0.81
C) $3.84
D) $4.67

Question

Quizplus · Accepted Answer

This question requires you to calculate the budgeted MOH rate using the formula for total MOH costs in department's cost pool divided by the total quantity of that department's cost driver. This calculation is ($122,000 + $18,000 + $166,200 + $102,000)/$506,300 = $408,200/$506,300 = $0.81 (Choice B).

Susan Has Gathered the Following Data About the Tire Factory