The Crater Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and machine-hours in Dept. B. At the beginning of the year, the company made the following estimates:
$\begin{array}{lrr}
&\text { Dept A }&\text { Dept B}\
\text { Direct labor cost } & \$ 65,000 & \$ 42,000 \
\text { Manufacturing overhead } & \$ 91,000 & \$ 48,000 \
\text { Direct labor-hours } & 8,000 & 10,000 \
\text { Machine-hours } & 3,000 & 12,000
\end{array}$

What predetermined overhead rates would be used in Dept A and Dept B, respectively?
A) 71% and $4.00.
B) 140% and $4.00.
C) 140% and $4.80.
D) 71% and $4.80.

Question

The Crater Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and machine-hours in Dept. B. At the beginning of the year, the company made the following estimates:
$\begin{array}{lrr}
&\text { Dept A }&\text { Dept B}\
\text { Direct labor cost } & \$ 65,000 & \$ 42,000 \
\text { Manufacturing overhead } & \$ 91,000 & \$ 48,000 \
\text { Direct labor-hours } & 8,000 & 10,000 \
\text { Machine-hours } & 3,000 & 12,000
\end{array}$

What predetermined overhead rates would be used in Dept A and Dept B, respectively?
A) 71% and $4.00.
B) 140% and $4.00.
C) 140% and $4.80.
D) 71% and $4.80.

Quizplus · Accepted Answer

The predetermined overhead rate for Dept A is calculated as (Manufacturing Overhead / Direct Labor Cost) = $91,000 / $65,000 = 140%. For Dept B, it is (Manufacturing Overhead / Machine-hours) = $48,000 / 12,000 = $4.00 per machine-hour.

The Crater Company Uses Predetermined Overhead Rates to Apply Manufacturing