Question

The Laramie factory runs two departments: the Preparation Department and the Processing Department. The departmental overhead cost pool for the Preparation Department was $25,000 and was $20,000 for the Processing Department. The total amount of departmental allocation base was 400 DL hours in the Preparation Department and 600 DL hours in the Processing Department. What is the estimated departmental overhead cost pool for each department?

Answer 1

Answer:

The answer are:

• $62.50 per direct labor hour - for preparation department
• $33.33 per direct labor hour - for processing department

Explanation:

To calculate the departmental overhead cost per direct labor hour we must divide the total overhead cost over the total amount of direct labor hours.

Preparation department: $25,000 / 400 DLH = $62.50 per DLH

Processing department: $20,000 / 600 DLH = $33.33 per DLH