Marciante Corporation has two production departments, Casting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting 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 Finishing Department is closest to:
A) $71,500
B) $52,000
C) $34,794
D) $19,500

Question

Marciante Corporation has two production departments, Casting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting 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 Finishing Department is closest to:
A) $71,500 
B) $52,000 
C) $34,794 
D) $19,500

Quizplus · Accepted Answer

Finishing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $52,000 + ($3.90 per direct labor-hour × 5,000 direct labor-hours)
= $52,000 + $19,500 = $71,500

Marciante Corporation Has Two Production Departments, Casting and Finishing