Big Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year: Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department. Based on this information, what is the departmental manufacturing overhead rate for the machining and finishing department, respectively? (Round any intermediary calculations and your final answer to the nearest cent.)
A)$5.50 per machine hour and $13.75 per direct labor hour
B)$7.69 per machine hour and $1.41 per direct labor hour
C)$5.00 per machine hour and $1.25 per direct labor hour
D)$14.29 per machine hour and $11.11 per direct labor hour

Question

Big Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:  Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department. Based on this information, what is the departmental manufacturing overhead rate for the machining and finishing department, respectively? (Round any intermediary calculations and your final answer to the nearest cent.)
A)$5.50 per machine hour and $13.75 per direct labor hour 
B)$7.69 per machine hour and $1.41 per direct labor hour 
C)$5.00 per machine hour and $1.25 per direct labor hour 
D)$14.29 per machine hour and $11.11 per direct labor hour

Quizplus · Accepted Answer

To calculate the departmental overhead rate for each department, we need to divide the total manufacturing overhead costs for each department by the total machine hours for the machining department and total direct labor hours for the finishing department, respectively.

From the information given, we know that Big Trail Running Company is predominantly driven by machine hours for the machining department and direct labor hours for the finishing department. Therefore, we use machine hours and direct labor hours as the allocation base for these two departments.

Total manufacturing overhead costs = $187,200 
Total machine hours for machining department = 37,440 
Total direct labor hours for finishing department = 149,760

Departmental manufacturing overhead rate for machining department = Total manufacturing overhead costs / Total machine hours for machining department 
= $187,200 / 37,440 
= $5.00 per machine hour

Departmental manufacturing overhead rate for finishing department = Total manufacturing overhead costs / Total direct labor hours for finishing department 
= $187,200 / 149,760 
= $1.25 per direct labor hour

Therefore, the departmental manufacturing overhead rates for the machining and finishing departments are $5.00 per machine hour and $1.25 per direct labor hour, respectively. The correct answer is C.

Big Trail Running Company Has Started to Produce Running Apparel