Reference no: EM132791626

AMR Corp. currently uses a firm-wide overhead application based on expected direct labor hours. The following information is anticipated at the beginning of the year.

                                  Department A                Department B
Direct materials         P 25.00/1b.                   P 17.00/1b.
Direct labor hours          10,000                          5,000
Machine hours                  2,000                    10,000
Overhead                    P115, 000                  P85, 000
Labor rate                    P 15.00/hr              P 12.00/hr

Problem 1: If the firm maintains the current method, the overhead application rate is:

a. P 7.67/hr
b. P11.50/hr
c. P13.33/hr
d. P20.00/hr

Problem 2: If departmental rates were adopted, what would be the rates for Departments A (Based on direct labors hours) and B (based on machine hours)

             A              B
a. P11.50          P 8.50
b. P11.15          P17.00
c. P57.50          P 8.50
d. P57.50         P17.50