Swango Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: The estimated total manufacturing overhead for the Customizing Department is closest to:
A) $24,000
B) $110,400
C) $86,400
D) $60,379

Question

Swango Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:  The estimated total manufacturing overhead for the Customizing Department is closest to:
A) $24,000 
B) $110,400 
C) $86,400 
D) $60,379

Quizplus · Accepted Answer

Customizing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $86,400 + ($3.00 per direct labor-hour × 8,000 direct labor-hours)
= $86,400 + $24,000 = $110,400

Swango Corporation Has Two Production Departments, Casting and Customizing