Gabriel Company uses the department approach for allocating overhead.The Assembly Department uses direct labor hours as its allocation base and the Grinding Department uses machine hours as its allocation base.The data for each is as follows:

What is the allocation rate for each Department (round to the nearest cent)?
A)Assembly = $11.00 per direct labor hour;Grinding = $220.00 per machine hour.
B)Assembly = $0.13 per direct labor hour;Grinding = $0.02 per machine hour.
C)Assembly = $8.00 per direct labor hour;Grinding = $60.00 per machine hour.
D)Assembly = $10.48 per direct labor hour;Grinding = $10.48 per machine hour.
E)None of the answer choices is correct.

Question

Gabriel Company uses the department approach for allocating overhead.The Assembly Department uses direct labor hours as its allocation base and the Grinding Department uses machine hours as its allocation base.The data for each is as follows:

What is the allocation rate for each Department (round to the nearest cent) ?

What is the allocation rate for each Department (round to the nearest cent)?
A)Assembly = $11.00 per direct labor hour;Grinding = $220.00 per machine hour. 
B)Assembly = $0.13 per direct labor hour;Grinding = $0.02 per machine hour. 
C)Assembly = $8.00 per direct labor hour;Grinding = $60.00 per machine hour. 
D)Assembly = $10.48 per direct labor hour;Grinding = $10.48 per machine hour. 
E)None of the answer choices is correct.

Quizplus · Accepted Answer

The allocation rate for the Assembly department is calculated by dividing the total overhead cost of $480,000 by the total direct labor hours of 60,000, which results in an allocation rate of $8.00 per direct labor hour. 
Similarly, the allocation rate for the Grinding department is calculated by dividing the total overhead cost of $264,000 by the total machine hours of 4,800, which results in an allocation rate of $55 per machine hour. Rounded to the nearest cent, the allocation rates are: 
Assembly = $8.00 per direct labor hour; Grinding = $55.00 per machine hour. Thus, the correct option is C.

Gabriel Company Uses the Department Approach for Allocating Overhead