Question

Garza Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
Casting Customizing
Machine-hours 25,000 24,000
Direct labor-hours 7,000 7,000
Total fixed manufacturing overhead cost $145,000 $35,000
Variable manufacturing overhead per machine-hour $1.10
Variable manufacturing overhead per direct labor-hour $3.20

The estimated total manufacturing overhead for the Customizing Department is closest to:________

Answer 1

Answer:

$57,400

Explanation:

The computation of the estimated total manufacturing overhead for the Customizing Department is shown below:

= Total fixed manufacturing overhead cost + Direct labor-hours × Variable manufacturing overhead per direct labor-hour

= $35,000 + 7,000 direct labor hours × $3.20

= $35,000 + $22,400

= $57,400

All other information that is given in the question is ignored.