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Tanner Bay Inc. comprises of two departments, Assembly and Packaging. The company employs a job-order costing system and find outs a predetermined overhead rate in each department. The Assembly Department bases its rate on machine hrs and the Packaging Department bases its rate on direct labor hours. At the starting of the year, the company made the given estimates:

                                        Assembly  Packaging

Direct Labor-hours                 3,000       4,000

Machine-hours                      8,500       9,900

Manufacturing Overhead      $144,500   $172,000

Direct labor cost                $89,200     $101,000

Suppose that also the given actual data on Job #503 which was started and completed throughout the year:

                                      Assembly Packaging

Direct Labor-hours                 23          37

Machine-hours                     109         142

Manufacturing Overhead      $8,787      $6,566

Direct labor cost                 $2,100      $1,990 

Find out the predetermined overhead rate to be employed in each department? Show calculations.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919143

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