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Rafner Manufacturing identified the following budgeted data in its two production departments.

Assembly Finishing
Manufacturing overhead costs $1,200,000 $600,000
Direct labor hours 12,000 DLH 20,000 DLH
Machine hours used 6,000 MH 16,000 MH

What are the company's departmental overhead rates if the assembly department assigns overhead based on direct labor hours and the finishing department assigns overhead based on machine hours?

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Answer:

$137.5

Explanation:

The Rafner Manufacturing assigns its manufacturing overheads cost on machine and labor hours. The assembly department assigns its overheads based on direct labor hours. The overhead rate will be,

$1,200,000 / 12,000 = $100 / labor hour

The finishing department assigns its overheads based on machine hours,

$600,000 / 16,000 Machine hours = 37.5

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