Prayer Corporation has two production departments, Machining and Customizing.The company uses a job-order costing system and computes a predetermined overhead rate in each production department.The Machining 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 Machining Department is closest to:
A)$148,200
B)$110,200
C)$38,000
D)$299,725

Question

Prayer Corporation has two production departments, Machining and Customizing.The company uses a job-order costing system and computes a predetermined overhead rate in each production department.The Machining 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 Machining Department is closest to:
A)$148,200 
B)$110,200 
C)$38,000 
D)$299,725

Quizplus · Accepted Answer

Machining Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $110,200 + ($2.00 per machine-hour × 19,000 machine-hours)
= $110,200 +$38,000 = $148,200

Prayer Corporation Has Two Production Departments, Machining and Customizing