The Silver Corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Department A and on machine-hours in Department B. At the beginning of the year, the Corporation made the following estimates: What predetermined overhead rates would be used in Department A and Department B, respectively?

A) 67% and $3.00
B) 150% and $5.00
C) 150% and $3.00
D) 67% and $5.00

Question

The Silver Corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Department A and on machine-hours in Department B. At the beginning of the year, the Corporation made the following estimates:

What predetermined overhead rates would be used in Department A and Department B, respectively?

A) 67% and $3.00
B) 150% and $5.00
C) 150% and $3.00
D) 67% and $5.00

MARIA ANDRANGO · Accepted Answer

Final Answer : C, Explanation :  To calculate the predetermined overhead rate for Department A, we divide the estimated manufacturing overhead cost by the estimated labor cost:$180,000 / $120,000 = 150%To calculate the predetermined overhead rate for Department B, we divide the estimated manufacturing overhead cost by the estimated machine-hours:$90,000 / 30,000 = $3.00Therefore, the predetermined overhead rate for Department A is 150% and for Department B is $3.00, which is only given in option C.

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