3-15 Departmental Overhead Rates (L01, L02, L03) Diewold Company has two departments, Milling and Assembly. The company uses ajoborder costing system and computes a predetermined overhead rate in each department. The Milling Department bases its rate on machinehours, and the Assembly Department bases its rate on direct laborhours. At the beginning of the year, the company made the following estimates: Departmet 80,000 228,000 20,000 192,000 60,000 36,000 Milling Assembly Direct LaborHours 8,000 80,000 MachineHours 60,000 3.000 Total ixed Manufacturing Overhead Cost $390,000 $500,000 Variable Manufacturing Overhead per MachineHour $2.00 Variable Manufacturing Overhead per Direct LaborHour $3.75 Required: 1 Compute the predetermied overhead rate to be used in each department. The estimated total manufacturing overhead cost in the Milling Department is computed as follows: Y = $390,000 + ($2.00 per MH) (60,000 MH) Estimated xed manufacturing overhead $390,000 Estimated variable manufacturing overhead $2.00 per MH x 60,000 MHs 120,000 Estimated total manufacturing overhead cost $510,000 The predetermined overhead rate is computed as follows: Estimated total manufacturing overhead $510,000 + Estimated total machinehours 60,000 MHs = Predetermined overhead rate $8.50 per MH Change in cost + Change in activity