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A company identified the following estimated data in its two production departments. During the current month, Assembly used 200 direct labor hours and 300 machine hours and Finishing used 300 hours direct labor hours and 200 machine hours. If the company uses a departmental overhead rate based on machine hours, how much overhead cost is assigned to Finishing this month?

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abiolataiwo2015

Answer:

$9,000

Explanation:

1.Finishing’s departmental rate based on MH

= Finishing’s costs/Finishing’s machine hours

= $90,000/2,000 = $45 per MH

2.Cost assigned to Finishing based on MH

= Finishing’s departmental rate based on MH * Finishing’s currently used machine hours

= $45 per MH * 200 MH = $9,000

Therefore If the company uses a departmental overhead rate based on machine hours, $9,000 overhead cost will be assigned to Finishing this month