A radial tire manufacturer produces products in two departmentslong dashdivisions a and

b. the company uses separate predetermined overhead allocation rates for each department to allocate its overhead. divisions a and b have estimated manufacturing overhead costs of $ 160 comma 000$160,000 and $ 360 comma 000$360,000?, respectively. division a uses machine hours as the allocation? base, and division b uses direct labor hours as the allocation base. the total estimated machine hours were 30 comma 00030,000?, and direct labor hours were 21 comma 00021,000 for the year. calculate the departmental predetermined overhead allocation rates.? (round your answer to the nearest? cent.)

Question

Business

Lainey Richmond

10 November, 19:19

A radial tire manufacturer produces products in two departmentslong dashdivisions a and

b. the company uses separate predetermined overhead allocation rates for each department to allocate its overhead. divisions a and b have estimated manufacturing overhead costs of $ 160 comma 000$160,000 and $ 360 comma 000$360,000?, respectively. division a uses machine hours as the allocation? base, and division b uses direct labor hours as the allocation base. the total estimated machine hours were 30 comma 00030,000?, and direct labor hours were 21 comma 00021,000 for the year. calculate the departmental predetermined overhead allocation rates.? (round your answer to the nearest? cent.)

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Answers (1)

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Bernard Winters · Answer 1

Let’s say that,

Manufacturing Overhead Cost = MOC

A = Division A

B = Division B

Working Time = T (either machine hours or labor hours)

The given variables are:

MOC (A) = $160,000

MOC (B) = $360,000

T (A) = 30,000 machine hours

T (B) = 21,000 labor hours

We are asked to find for the predetermined Overhead Allocation Rates. This is calculated using the formula:

Overhead Allocation Rates = MOC / T

Overhead Allocation Rate (A) = $160,000 / 30,000 machine hours

Overhead Allocation Rate (A) = $5.33 per machine hour

Overhead Allocation Rate (B) = $360,000 / 21,000 labor hours

Overhead Allocation Rate (B) = $17.14 per labor hour