Question

Question 14 Swifty Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2020, the following estimates were made for the year.
Department D Department E Department K
Manufacturing overhead $1,240,000 $1,500,000 $720,000
Direct labor costs $1,550,000 $1,250,000 $450,000
Direct labor hours 100,000 125,000 40,000
Machine hours 400,000 500,000 120,000

During January, the job cost sheets showed the following costs and production data.

Department D Department E Department K
Direct materials used $210,000 $189,000 $117,000
Direct labor costs $180,000$1 65,000 $56,250
Manufacturing overhead incurred $148,500 $168,000 $118,500
Direct labor hours 12,000 16,500 5,250
Machine hours 51,000 67,500 10,410

Required:
Compute the predetermined overhead rate for each department.

Answer 1

Answer:

Dept. D = 80%

Dept. E = $12

Dept. K = $6

Explanation:

The computation of the predetermined overhead rate for each department is shown below:-

Department D = Manufacturing overhead ÷ Direct labor costs

= $1,240,000 ÷ $1,550,000

= 80%

Department E = Manufacturing overhead ÷ Direct labor hours

= $1,500,000 ÷ 125,000

= $12

Department K = Manufacturing overhead ÷ Machine hours

= $720,000 ÷ 120,000

= $6