Question
Hickingbottom Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production
Hickingbottom Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Departments predetermined overhead rate is based on machine-hours and the Finishing Departments predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
Forming | Finishing | |||||
Machine-hours | 17,000 | 15,000 | ||||
Direct labor-hours | 1,000 | 7,000 | ||||
Total fixed manufacturing overhead cost | $ | 96,900 | $ | 65,800 | ||
Variable manufacturing overhead per machine-hour | $ | 2.00 | ||||
Variable manufacturing overhead per direct labor-hour | $ | 3.60 | ||||
During the current month the company started and finished Job M381. The following data were recorded for this job:
Job M381: | Forming | Finishing | ||
Machine-hours | 80 | 30 | ||
Direct labor-hours | 30 | 40 | ||
Direct materials | $ | 840 | $ | 350 |
Direct labor cost | $ | 750 | $ | 1,000 |
The predetermined overhead rate for the Finishing Department is closest to:
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