Question

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 2020, the following estimates were made for the year.

		Department
		D		E		K
Manufacturing overhead		$770,000		$1,500,000		$780,000
Direct labor costs		$1,100,000		$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		10,480

(a)

Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 12.50 or 12.50%.)

		Overhead rate
Department D			%
Department E		$	per direct labor hour
Department K		$	per machine hour

Answer 1

Statement showing Computations
Particulars	Amount
Estimated Manufacturing overhead	770,000.00
Estimated Direct labor costs	1,100,000.00
predetermined overhead rate of Department D=770,000/1100,000	70.00%
Particulars	Amount
Estimated Manufacturing overhead	1,500,000.00
Estimated Direct labor hours	125,000.00
predetermined overhead rate of Department E = 1500,000/125,000	12.00
Particulars	Amount
Estimated Manufacturing overhead	780,000.00
Estimated machine hours	120,000.00
predetermined overhead rate of Department K = 780,000/120,000	6.50