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    Compton Company Predetermined Overhead Rate

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    65. Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates:
    Dept. A Dept. B
    Direct labor cost $56,000 $33,000
    Factory overhead $67,200 $45,000
    Direct labor hours 8,000 9,000
    Machine hours 4,000 15,000

    What predetermined overhead rate would be used in Department A and Department B, respectively?
    A) 83% and $5 C) 120% and $3
    B) 83% and $3 D) 83% and $3

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    Solution Summary

    This posting helps with an accounting problem.