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	411,000 DLH	91,000 DLH
Machine hours	811,000 MH	811,000 MH
Overhead costs	$534,300	$411,000

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

$1.30 per DLH.

$0.66 per DLH.

$1.88 per DLH.

$4.52 per DLH.

$0.51 per DLH.

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

$1.30 per DLH

$0.51 per DLH

$0.66 per DLH

$1.88 per DLH

$4.52 per DLH

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

$0.66 per MH

$1.88 per MH

$1.30 per MH

$0.51 per MH

$4.52 per MH

Answer 1

Concepts and reason

Direct labor: Direct labor is defined as workers directly engaged in the production area.

Direct labor hour: Direct labor hour is the efficiency of labor to produce goods in hours.

Direct material: Direct material is a raw material used by the manufacturer to make finished goods. These materials can easily traceable in the finished goods.

Overheads are defined as an indirect cost. They are not directly incurred during the production process.

Machine hour: Machine hour is defined as the usage cost of machine one hour.

Fundamentals

The formula to calculate the overhead rate based on direct labor.

The formula to calculate the overhead rate based on machine hours.

(26)

The overhead cost is $534,300 and a direct labor hour is 411,000 DLH. Using overhead costs and direct labor hours, calculate the overhead rate for a maxing department based on direct labor hours.

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

(27)

The overhead cost is $411,000 and a direct labor hour is 91,000. Using overhead costs and direct labor hours, calculate the overhead rate for a baking department based on direct labor hours.

Therefore, Aztec's departmental overhead rate for the baking department based on direct labor hours is .

(28)

The overhead costs of the baking department are $411,000 and machine hours of the baking department is 811,000 MH. Using overhead costs of the baking department and machine hours of the baking department, calculate the overhead rate for the baking department based on machine hours.

Therefore, Aztec's departmental overhead rate for the baking department based on machine hours is .

Ans: Part 26

Aztec's departmental overhead rate for the mixing department based on direct labor hours is $1.30 per DLH.

Part 27

Aztec's departmental overhead rate for the baking department based on direct labor hours is $4.52 per DLH.

Part 28

Aztec's departmental overhead rate for the baking department based on machine hours is $0.51 per MH.