The following information pertains to Utter Company: Utter Company does not divide costs into fixed and variable components.Personnel costs are allocated based on the number of employees,and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labour hours.(Round amounts to dollars.)
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If the direct method is used to allocate support department costs,what would be the predetermined overhead rate for the Fabrication Department (rounded to two decimal places)?

Question

The following information pertains to Utter Company:  Utter Company does not divide costs into fixed and variable components.Personnel costs are allocated based on the number of employees,and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labour hours.(Round amounts to dollars.)
-
If the direct method is used to allocate support department costs,what would be the predetermined overhead rate for the Fabrication Department (rounded to two decimal places)?

Quizplus · Accepted Answer

The predetermined overhead rate using the direct method is calculated by dividing the total costs allocated to the Fabrication Department by its direct labor hours or machine hours, depending on the allocation base used. Without specific numbers, the correct answer cannot be determined precisely; however, the direct method involves allocating support department costs directly to the producing departments without any interdepartmental allocations, simplifying the calculation.

The Following Information Pertains to Utter Company: Utter Company