The Bondi Company uses a predetermined overhead rate in applying overhead to production orders on a direct labor cost basis in Department A and on a machine hour basis in Department B. At the beginning of the year, the company made the following estimates:
$$\begin{array} { l r r }
& \text { Dept. A } & \text { Dept. B } \
\text { Direct labor cost } & \$ 60,000 & \$ 40,000 \
\text { Factory overhead } & \$ 90,000 & \$ 45,000 \
\text { Direct labor hours } & 6,000 & 9,000 \
\text { Machine hours } & 2,000 & 15,000
\end{array}$$
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

The Bondi Company uses a predetermined overhead rate in applying overhead to production orders on a direct labor cost basis in Department A and on a machine hour basis in Department B. At the beginning of the year, the company made the following estimates:
$$\begin{array} { l r r } 
& \text { Dept. A } & \text { Dept. B } \
\text { Direct labor cost } & \$ 60,000 & \$ 40,000 \
\text { Factory overhead } & \$ 90,000 & \$ 45,000 \
\text { Direct labor hours } & 6,000 & 9,000 \
\text { Machine hours } & 2,000 & 15,000
\end{array}$$
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.

Quizplus · Accepted Answer

The predetermined overhead rate in Department A is $1.50 per direct labor dollar ($90,000/$60,000) and in Department B is $3.00 per machine hour ($45,000/15,000).

The Bondi Company Uses a Predetermined Overhead Rate in Applying