A company produces surgical equipment which goes through threes processes, 1A1, 2B2 and 3C3, before they are complete. Expected costs and activities for the three departments are shown below. All departments have departmental overhead rates based on direct labor hours. Therefore, the overhead rate for each department is $5 per direct labor hour.
$$\begin{array} { l c c c }
& \text { Department } & \text { Department } & \text { Department } \
& 1 \mathrm {~A} 1 & 2 \mathrm {~B} 2 & 3 \mathrm { C } 3 \
\text { Machine hours } & 15,000 \mathrm { MH } & 25,000 \mathrm { MH } & 20,000 \mathrm { MH } \
\text { Direct labor hours } & 22,830 \mathrm { DLH } & 10,650 \mathrm { DLH } & 29,200 \mathrm { DLH } \
\text { Overhead costs } & \$ 114,150 & \$ 213,000 & \$ 73,000
\end{array}$$

Question

A company produces surgical equipment which goes through threes processes, 1A1, 2B2 and 3C3, before they are complete. Expected costs and activities for the three departments are shown below. All departments have departmental overhead rates based on direct labor hours. Therefore, the overhead rate for each department is $5 per direct labor hour.
 $$\begin{array} { l c c c } 
& \text { Department } & \text { Department } & \text { Department } \
& 1 \mathrm {~A} 1 & 2 \mathrm {~B} 2 & 3 \mathrm { C } 3 \
\text { Machine hours } & 15,000 \mathrm { MH } & 25,000 \mathrm { MH } & 20,000 \mathrm { MH } \
\text { Direct labor hours } & 22,830 \mathrm { DLH } & 10,650 \mathrm { DLH } & 29,200 \mathrm { DLH } \
\text { Overhead costs } & \$ 114,150 & \$ 213,000 & \$ 73,000
\end{array}$$

Quizplus · Accepted Answer

The overhead rate is calculated by dividing the total overhead costs by the total direct labor hours for each department. The given overhead rate of $5 per direct labor hour does not match the calculated rates for the departments based on the provided data.

A Company Produces Surgical Equipment Which Goes Through Threes Processes