Dean Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y.The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $13,500 are allocated on the basis of number of employees.The direct costs of Departments X and Y are $27,000 and $45,000, respectively. Data on standard service hours and number of employees are as follows:
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
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What is the overhead rate for Department X assuming the direct method is used?

Question

Dean Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y.The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $13,500 are allocated on the basis of number of employees.The direct costs of Departments X and Y are $27,000 and $45,000, respectively. Data on standard service hours and number of employees are as follows:
 Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
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What is the overhead rate for Department X assuming the direct method is used?

Quizplus · Accepted Answer

The overhead rate is calculated by dividing the total overhead costs by the total direct labor hours. Assuming the direct method is used, the overhead rate for Department X is $93.75.

Dean Manufacturing Company Has Two Support Departments, Maintenance Department and Personnel