Question
5. Assume a company has two manufacturing departments Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The
5. Assume a company has two manufacturing departments Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first set of data below is budgeted data for the company as a whole that was estimated at the beginning of the year. The second set of data relates to one particular job completed during the year Job Z.
Budgeted Data | Assembly | Fabrication | |||||
Manufacturing overhead costs | $ | 300,000 | $ | 400,000 | |||
Direct labor hours | 25,000 | 15,000 | |||||
Machine hours | 10,000 | 50,000 | |||||
Job Z | Assembly | Fabrication | |||||
Direct labor hours | 10 | hours | 2 | hours | |||
Machine hours | 1 | hour | 7 | hours | |||
Assume the company uses departmental predetermined overhead rates. It uses direct labor-hours as the allocation base in Assembly and machine-hours as the allocation base in Fabrication. What is the predetermined overhead rate in the Fabrication Department?
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