Solid Oak Bureau Company uses job costing. Solid Oak Bureau Company has two departments, Trimming and Finishing. Manufacturing overhead is allocated based on direct labor cost in the Trimming Department and direct labor hours in the Finishing Department. The following additional information is available: Actual data for completed Job No. 650 is as follows:
What is the predetermined manufacturing overhead rate for the Trimming Department?

Question

Solid Oak Bureau Company uses job costing. Solid Oak Bureau Company has two departments, Trimming and Finishing. Manufacturing overhead is allocated based on direct labor cost in the Trimming Department and direct labor hours in the Finishing Department. The following additional information is available:  Actual data for completed Job No. 650 is as follows:
 What is the predetermined manufacturing overhead rate for the Trimming Department?

Quizplus · Accepted Answer

The predetermined manufacturing overhead rate for the Trimming Department is calculated by dividing the budgeted manufacturing overhead cost by the budgeted direct labor cost. We do not have the budgeted manufacturing overhead cost, but we do know that the actual manufacturing overhead cost for the period was $120,000 and the actual direct labor cost for the Trimming Department was $92,308. Therefore, we can calculate the actual manufacturing overhead rate as follows:

Actual manufacturing overhead rate = Actual manufacturing overhead cost / Actual direct labor cost = $120,000 / $92,308 = 1.3

Since the predetermined manufacturing overhead rate is based on budgeted amounts, we can assume that the budgeted rate would be the same as the actual rate. Therefore, the predetermined manufacturing overhead rate for the Trimming Department is 130% of direct labor cost.

Solid Oak Bureau Company Uses Job Costing