Compton Company Uses a Predetermined Overhead Rate in Applying Overhead

question 97

Multiple Choice

Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labour 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: $\begin{array}{|l|r|r|}\hline & \text { Department A } & \text { Department B } \\\hline \text { Direct labour cost } & \$ 56,000 & \$ 33,000 \\\hline \text { Manufacturing overhead } & \$ 67,200 & \$ 45,000 \\\hline \text { Direct labour hours } & 8,000 & 9,000 \\\hline \text { Machine hours } & 4,000 & 15,000 \\\hline\end{array}$ What predetermined overhead rate would be used in Departments A and B,respectively?

• A) 83% and $5.00.
• B) 83% and $3.00.
• C) 120% and $3.00.
• D) 120% and $5.00. Dept. A = $67,200/$56,000 = 120% Dept. B = $45,000/15,000m. hrs = $3/m. hr.

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