Question

Problem 15-4A (Part Level Submission) Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2017, the following estimates were made for the year. Department D E K Manufacturing overhead $924,000 $1,500,000 $900,000 Direct labor costs $1,320,000 $1,875,000 $675,000 Direct labor hours 150,000 125,000 60,000 Machine hours 600,000 750,000 120,000 During January, the job cost sheets showed the following costs and production data. Department D E K Direct materials used $210,000 $189,000 $117,000 Direct labor costs $180,000 $165,000 $56,250 Manufacturing overhead incurred $148,500 $186,000 $118,500 Direct labor hours 12,000 16,500 5,250 Machine hours 51,000 67,500 10,440

(a) Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 10.25.) Overhead rate Department D % Department E $ per direct labor hour Department K $ per machine hour

Answer 1

(a) Department D = $924,000/$1,320,000 = 70% direct cost

Department E =  $1,500,000/125,000 = $12 per direct labor hour

Department K = $900,000/120,000 = $7.50 per machine hour