The Silver Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine hours basis in Department B.At the beginning of the year,the company made the following estimates:
What predetermined overhead rate would be used in Department A and Department B respectively?
A)150% and 300%.
B)150% and $3.00.
C)$1.50 and 300%.
D)$1.50 and $3.00.

Question

Quizplus · Accepted Answer

Department A uses a labor cost basis, so the rate is a percentage (150%). Department B uses a machine hours basis, so the rate is a dollar amount per machine hour ($3.00).

The Silver Company Uses a Predetermined Overhead Rate in Applying