Petty Corporation has two production departments, Milling and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine-hours and the Finishing 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: The estimated total manufacturing overhead for the Milling Department is closest to:

A) $408,000
B) $38,000
C) $148,000
D) $186,000

Question

Petty Corporation has two production departments, Milling and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine-hours and the Finishing 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:

The estimated total manufacturing overhead for the Milling Department is closest to:

A) $408,000
B) $38,000
C) $148,000
D) $186,000

Zybrea Knight · Accepted Answer

Final Answer : D, Explanation :  The predetermined overhead rate for Milling Department is estimated total manufacturing overhead / estimated machine-hours, which is (440,000 + 270,000) / 30,000 = $20 per machine-hour. Therefore, the estimated total manufacturing overhead for Milling Department is $20 x 9,300 = $186,000.

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