Question

Swango Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Machine-hours Direct labor-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Casting 19,000 1,000 $138,799 $ 1.60 Customizing 11,000 8,000 $86,400 $ 3.00 The estimated total manufacturing overhead for the Customizing Department is closest to:

Answer 1

Answer

• Correct Answer = Option #4: $ 110,400 = Estimated total manufacturing overhead for Customising Department.
• Customising Department estimated overhead = Variable overhead + Fixed overhead
  = ($3.00 per DLHs x 8000 DLHs) + $ 86400
  = 24000 + 86400
  = $ 110,400