Barbeau Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling 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:
During the current month the company started and finished Job A492. The following data were recorded for this job:

-The estimated total manufacturing overhead for the Customizing Department is closest to:
A) $63,500
B) $21,500
C) $42,000
D) $33,853

Question

Barbeau Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling 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:
  During the current month the company started and finished Job A492. The following data were recorded for this job:
 
-The estimated total manufacturing overhead for the Customizing Department is closest to:
A) $63,500 
B) $21,500 
C) $42,000 
D) $33,853

Quizplus · Accepted Answer

Customizing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $42,000 + ($4.30 per direct labor-hour × 5,000 direct labor-hours)
= $42,000 + $21,500 = $63,500

Barbeau Corporation Has Two Production Departments, Milling and Customizing