Question
Kline Company expects to incur $600,000 in overhead costs this coming year$100,000 in the Cut and Polish department and $500,000 in the Quality Control department.
Kline Company expects to incur $600,000 in overhead costs this coming year$100,000 in the Cut and Polish department and $500,000 in the Quality Control department. Total annual direct labor costs are expected to be $120,000. The Cut and Polish department expect to use 18,750 machine hours, and the Quality Control department plans to use 37,500 hours of direct labor time for the year.
Required: Assume that Kline Company allocates overhead costs with the plant-wide approach, and direct labor cost is the allocation base. Calculate the rate used by the company to allocate overhead costs. Assume that Kline Company allocates overhead costs with the department approach. Calculate the rate used by each department to allocate overhead costs.
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