Question

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below. Mixing Baking Direct labor hours 405,000 DLH 85,000 DLH Machine hours 805,000 MH 805,000 MH Overhead costs $ 607,500 $ 405,000

Compute Aztec's departmental overhead rate... Compute Aztec's departmental overhead rate for the mixing department based on direct labor hours.

Compute Aztec's departmental overhead rate for the baking department based on machine hours.

Answer 1

Working Notes:
		Mixng Department		Baking Department
	Direct Labor Hours	405000		85000
	Direct Machine Hours	805000		805000
	Total Overheads	607500		405000
Solution: 1
	CACLULATION OF AZTEC'S MIXING DEPARTMENT OVERHEAD RATE AS PER DIRECT LABOR HOURS
	Overhead Application Rate =	Budgeted Overhead Cost	"/"	Budgeted Labor Hours	"="	Estimated Overhead rate PER Labor Hrs
	Overhead Application Rate =	$                     6,07,500	"/"	4,05,000	"="	$                       1.50
	Answer = Overhead rate = $ 1.50 Per Direct Labor Hours
	CACLULATION OF AZTEC'S BAKING DEPARTMENT OVERHEAD RATE ON THE BASIS OF MACHINE HOURS
	Overhead Application Rate =	Budgeted Overhead Cost	"/"	Budgeted Machine Hours	"="	Estimated Overhead rate PER Machine Hrs
	Overhead Application Rate =	$                     4,05,000	"/"	8,05,000	"="	$                       0.50
	Answer = Overhead rate = $ 0.50 Per Machine Hours.