Petty Corporation has two production departments, Milling and Finishing. 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 Finishing 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 Milling Department is closest to:
A) $408,000
B) $38,000
C) $148,000
D) $186,000

Question

Petty Corporation has two production departments, Milling and Finishing. 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 Finishing 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 Milling Department is closest to:
A) $408,000 
B) $38,000 
C) $148,000 
D) $186,000

Quizplus · Accepted Answer

Milling Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $148,000 + ($1.90 per machine-hour × 20,000 machine-hours)
= $148,000 +$38,000 = $186,000

Petty Corporation Has Two Production Departments, Milling and Finishing