Question

Big Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming​year:
Machining Department Finishing Department
Estimated Manufacturing Overhead by Department $1,000,000 100,000
Trail Running Shoes 130,000 machine hours 9,000 direct labor hours
Running Apparel 70,000 machine hours 71,000 direct labor hours
Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department.
1. Based on this​ information, what is the departmental manufacturing overhead rate for the machining and finishing​ department, respectively?​ (Round any intermediary calculations and your final answer to the nearest​ cent.)
A. $7.69 per machine hour and $1.41 per direct labor hour
B. $14.29 per machine hour and $11.11 per direct labor hour
C. $5.00 per machine hour and $1.25 per direct labor hour
D. $5.50 per machine hour and $13.75 per direct labor hour

Answer 1

Answer:

Option (C) is correct.

Explanation:

For Machining department,

Manufacturing overhead rate:

= Estimated Overhead cost ÷ Amount of allocation base

= [$1,000,000 ÷ (130,000 + 70,000) machine hours]

= $1,000,000 ÷ 200,000 machine hours

= $5.00 per machine hour

For Finishing department,

Manufacturing overhead rate:

= Estimated Overhead cost ÷ Amount of allocation base

= [$100,000 ÷ (9,000 + 71,000) direct labor hours]

= $100,000 ÷ 80,000 direct labor hours

= $1.25 per labor hour