Assume that the company uses the direct method of allocation. The predetermined overhead rate in the Assembly Department would be closest to:
A)$15.00
B)$16.27
C)$15.87
D)$16.00

Question

Quizplus · Accepted Answer

To calculate the predetermined overhead rate using the direct method, we need to divide the estimated total overhead costs for the period by the estimated total amount of the allocation base. 
For the Assembly Department:
Estimated Overhead costs = $820,000
Estimated Allocation base = 50,500 direct labor hours
Predetermined overhead rate = $820,000 / 50,500 = $16.237
Thus, the closest predetermined overhead rate is $16.27 (B).

Assume That the Company Uses the Direct Method of Allocation