Question

Charleston Company has two departments (Processing and Packaging) and uses a job-order costing system. Charleston applies overhead in Processing based on machine hours and on direct labor cost in Packaging. The following information is available for July:
Processing

Packaging

Machine hours

2,500

1,000

Direct labor cost

$44,500

$23,000

Applied overhead

$55,000

$51,750



Refer to Charleston Company. What is the overhead application rate per machine hour for Processing?

Please show calclations!

Answer 1

Answer:

$1.236= Estimated manufacturing overhead rate

Explanation:

Giving the following information:

Processing:

Direct labor cost= $44,500

Applied overhead= $55,000

To determine the estimated overhead rate, we need to use the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

55,000= Estimated manufacturing overhead rate*44,500

55,000/44,500= Estimated manufacturing overhead rate

$1.236= Estimated manufacturing overhead rate