Question

Jurica Corporation has two production departments, Forming and Customizing. 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 Customizing 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: Forming Customizing Machine-hours 19,000 15,000 Direct labor-hours 4,000 6,000 Total fixed manufacturing overhead cost $ 100,700 $ 63,000 Variable manufacturing overhead per machine-hour $ 2.00 Variable manufacturing overhead per direct labor-hour $ 3.90 The predetermined overhead rate for the Customizing Department is closest to: M

ultiple Choice $4.55 per direct labor-hour $3.90 per direct labor-hour $10.50 per direct labor-hour $14.40 per direct labor-hour

Answer 1

· Working

Working		Customizing Department:
A	Total Fixed Overheads	$                            63,000
B	Total DLHs	6,000
C = A/B	Fixed overhead rate	$                              10.50 per DLHs
D	Variable Overhead rate	$                                 3.90 per DLHs
E = C+D	Predetermined Departmental Overhead rates	$                              14.40 per DLHS [Answer]

· Correct Answer = Option #3: $ 14.40 per direct labor hour