Question

Hickingbottom Corporation has two production departments, Forming and Finishing. The company uses a job order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine hours and the Finishing 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 Forming Finishing 17,000 15,000 1,000 7,000 $96,900 $65,800 $ 2.00 $ 3.60 During the current month the company started and finished Job M381. The following data were recorded for this job: Forming Finishing Bob M381: Machine-hours Direct labor-hours Direct materials Direct labor cost $840 250 The predetermined overhead rate for the finishing Department is closest to

Answer 1

Correct option is: A. $13.00 per direct labor hour
Workings:
		Finishing Department
Variable overhead rate per Direct labor hour	=	$                  3.60
Fixed overhead rate per Direct labor hour ($65800 / 7000)	=	$                  9.40
Predetermined overhead cost	=	$                13.00

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