Question

Macalister Corporation is developing departmental overhead rates based on direct labor hours for its two production departments—Molding and Assembly. The Molding Department employs 16 people, and the Assembly Department employs 79 people. Each person in these two departments works 1,970 hours per year. The production-related overhead costs for the Molding Department are budgeted at $194,000, and the Assembly Department costs are budgeted at $83,000. Two support departments—Engineering and General Factory—directly support the two production departments and have budgeted costs of $201,000 and $386,000, respectively. The production departments’ overhead rates cannot be determined until the support departments’ costs are properly allocated. The following schedule reflects the use of the Engineering Department’s and General Factory Department’s output by the various departments.

	Engineering	General Factory	Molding	Assembly
Engineering hours	—	2,400	1,900	8,100
Square feet	90,450	—	428,130	84,420

For all requirements, round allocation ratios to four significant digits and round allocated costs to the nearest dollar.

Required:

1. Calculate the overhead rates per direct labor hour for the Molding Department and the Assembly Department using the direct allocation method to charge the production departments for support department costs. Round final answers to the nearest cent.

	Overhead rate per DLH
Molding	$
Assembly	$

Answer 1

Allocation

	Molding	Assembly
Direct cost	194000	83000
Engineering cost	201000*19/100 = 38190	162810
General factory	322424	63576
Total Cost	554614	309386
Direct labor hour	31520	155630
Rate pr hour	17.60	1.99