Garza Corporation has two production departments, Casting and Customizing. The company uses a job-order costing...
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Accounting
Garza Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
Casting
Customizing
Machine-hours
20,000
13,000
Direct labor-hours
1,000
7,000
Total fixed manufacturing overhead cost
$
152,000
$
68,600
Variable manufacturing overhead per machine-hour
$
2.10
Variable manufacturing overhead per direct labor-hour
$
4.30
The predetermined overhead rate for the Casting Department is closest to:
a
$7.60 per machine-hour
b
$27.71 per machine-hour
c
$9.70 per machine-hour
d
$2.10 per machine-hour
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