The following information pertains to Utter Company: Utter 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 labour hours. (Round amounts to dollars.)
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be

A) £28.80.
B) £5.40.
C) £7.28.
D) £24.78.

Question

The following information pertains to Utter Company: Utter 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 labour hours. (Round amounts to dollars.)
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be

A) £28.80. 
B) £5.40. 
C) £7.28. 
D) £24.78.

Quizplus · Accepted Answer

Since the predetermined overhead rate for fabrication and assembly is based on direct labour hours, the overhead cost pool for the Fabrication Department needs to be divided by the estimated direct labour hours for the department. However, the information given in the question does not provide us with this information. Therefore, we cannot calculate the predetermined overhead rate for the Fabrication Department. Hence, the answer is D, none of the given choices can be determined based on the information provided.

The Following Information Pertains to Utter Company: Utter Company Does