Tanner Bay Inc. has two departments, Assembly and Packaging. The company uses a job-order costing - 14446

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Tanner Bay Inc. has two departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Assembly Department bases its rate on machine hours and the Packaging Department bases its rate on the direct labor hours. At the beginning of the year, the company made the following estimates. Assembly Packaging Direct labor-hours 3,000 4,000 Machine-hours 8,500 9,900 Manfacturing overhead costs \$144,500 \$172,000 Direct Labor Cost 89,200 101,000 Assume also the following actual data on Job#503 which was started and completed during the year. Assembly Packaging Direct labor hours 23 37 Machine-hours 109 142 Materials requistioned \$ 8,787 \$6,566 Direct labor cost 2,100 1,990 What is the predetermined overhead rate to be used in each department? Show computations

Solution Description

Tanner Bay Inc. has two departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Assembly Department bases its rate on machine hours and the Packaging Department bases its rate on direct labor hours. At the beginning of the year, the company made the following 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 Assume also the following actual data on Job #503 which was started and completed during 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 What is the predetermined overhead rate to be used in each department? Show Computations

Predetermined Overhead Rate-Assembly Dept. = \$144,500/8500 = \$17/Machine hour

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