Reference no: EM132837056

The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labour cost in Department A and on machine hours in Department B.

At the beginning of the year, the company made the following estimates:

                                     Department A                    Department B
Direct labour cost                 $120,000                      $40,000
Manufacturing overhead            $60,000               $80,000
Direct labour hours                      6,000                   8,000
Machine hours                               2,000                10,000

Problem 1: What predetermined overhead rates would be used in Departments A and B, respectively?

a. 50% and $5.00.
b. 200% and $5.00.
c. 110% and $15.00.
d. 50% and $8.00.