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Marvel Company uses a predetermined overhead rate in applying overhead to production orders on a labor-cost basis in Department A and on a machine-hours basis

Marvel Company uses a predetermined overhead rate in applying overhead to production orders on a labor-cost basis in Department A and on a machine-hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates:

Dept. A Dept. B
Direct labor cost $ 56,000 $ 33,000
Factory overhead $ 67,200 $ 45,000
Direct labor-hours 8,000 9,000
Machine-hours 4,000 15,000

What predetermined overhead rate would be used in Department A and Department B, respectively?

Multiple Choice

  • 83% and $5.

  • 83% and $3.

  • 120% and $3.

  • 120% and $5.

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