Reference no: EM132556514
Stressed Out Inc. has two departments: cutting and finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The cutting department bases its rate on machine-hours, and the finishing department bases its rate on direct labour cost. At the beginning of the year, the company made the following estimates:
Department Cutting Finishing
Direct labour-hours 5,000 21,000
Machine-hours 45,000 3,000
Manufacturing overhead cost $382,500 $499,500
Direct labour cost $ 75,000 $270,000
Required:
Question 1: Calculate the predetermined overhead rate to be used in each department.