The following information pertains to Blaze Company:
Blaze Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine-hours. Predetermined overhead rates for Fabrication and Assembly are based on direct labor-hours (round amounts to dollars).
If the direct method is used to allocate service department costs, the predetermined overhead rate for the Fabrication Department (rounded to 2 decimal places) would be:
A) $42.00
B) $65.00
C) $64.10
D) $69.55

Question

The following information pertains to Blaze Company:
 Blaze Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine-hours. Predetermined overhead rates for Fabrication and Assembly are based on direct labor-hours (round amounts to dollars).
If the direct method is used to allocate service department costs, the predetermined overhead rate for the Fabrication Department (rounded to 2 decimal places) would be:
A) $42.00 
B) $65.00 
C) $64.10 
D) $69.55

Quizplus · Accepted Answer

Personnel allocated to Fabrication
15/40 × $160,000 =
$ 60,000
Maintenance allocated to Fabrication
12,000 / 20,000 × $300,000 =
180,000
Total service department costs allocated to Fabrication
$240,000
Fabrication departmental overhead
280,000
Total Fabrication Dept. overhead
$520,000
Fabrication direct labor hours
÷ 8,000
Fabrication Dept. Predetermined Overhead Rate
$65.00

The Following Information Pertains to Blaze Company