Turtle Company produces t-shirts which go through two operations, cutting and sewing, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the cutting department based on direct labor hours is $2.69 per direct labor hour (rounded to two decimals).
$\begin{array}{ccc}
& \text { Cutting } & \text { Sewing } \
\text { Direct labor hours } & 250,000 & 75,000 \mathrm{DLH}\&\text { DLH }\
\text { Machine hours } & 125,000 & 150,000 \mathrm{MH} \
& \mathrm{MH} & \
\text { Overhead costs } & \$ 500,000 & \$ 375,000
\end{array}$

Question

Turtle Company produces t-shirts which go through two operations, cutting and sewing, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the cutting department based on direct labor hours is $2.69 per direct labor hour (rounded to two decimals).
 $\begin{array}{ccc} 
& \text { Cutting } & \text { Sewing } \
\text { Direct labor hours } & 250,000 & 75,000 \mathrm{DLH}\&\text { DLH }\
\text { Machine hours } & 125,000 & 150,000 \mathrm{MH} \
& \mathrm{MH} & \
\text { Overhead costs } & \$ 500,000 & \$ 375,000
\end{array}$

Quizplus · Accepted Answer

The departmental overhead rate for the cutting department based on direct labor hours is calculated by dividing the overhead costs by the direct labor hours: $500,000 / 250,000 DLH = $2.00 per direct labor hour, not $2.69.

Turtle Company Produces T-Shirts Which Go Through Two Operations, Cutting