Question not complete
Direct Labour Cost is missing
Direct Labor Cost ----- $50,000.00 $270,000.00
Answer:
a.
Overhead Rate (Cutting Department) = $5.5 per machine hour = $5.5 per machine hour
Overhead Rate (Finishing Department) = $12.2 per labour hour
b. Total Manufacturing Cost = $644
c. Yes
Explanation:
a. To determine the predetermined overhead rate appropriate for each department.
Given
Cutting Department
The Cutting Department calculates its rate based on machine-hours
Manufacturing Overhead Costs = $264,000
Machine Hours = 48,000
Finishing Department
For the Finishing Department, the rate is calculated based on direct labor-hours.
Manufacturing Overhead Costs = $366,000
Direct Labour Cost = $270,000
Overhead Rate (Cutting Department) = Manufacturing Overhead Cost/Machine Hours
Overhead Rate (Cutting Department) = $264,000/48,000
Overhead Rate (Cutting Department) = $5.5 per machine hour
Overhead Rate (Finishing Department) = Manufacturing Overhead Cost/Machine Hours
Overhead Rate (Finishing Department) = $366,000/$270,000
Overhead Rate (Finishing Department) = 1.36
Overhead Rate (Finishing Department) = 136% direct labour cost
b.
The Cutting Department's rate is based on machine-hours
Given
Machine hours = 80 machine hours
Overhead Rate = $5.5 per machine hours ------ This was calculated
The Finishing Department's calculations rely on direct labor-hours.
Given
Direct Labour Cost = 150
Overhead Rate = 136% of labor cost ------ This was deduced
Overhead Applied (Cutting Department) = 80 * 5.5
Overhead Applied = 440
Overhead Applied (Finishing Department) = 136% * 150
Overhead Applied = $204
Total Overhead Applied = $440 + $204
Total = $644
c. Yes
If the business utilizes a company-wide overhead rate linked to direct labor cost and if jobs have increased machine hours paired with lower labor costs, they would incur less overhead expenses.
