Hickingbottom Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming 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: FormingFinishingMachine-hours 17,000 15,000Direct labor-hours 1,000 7,000Total fixed manufacturing overhead cost$96,900$65,800Variable manufacturing overhead per machine-hour$2.00 Variable manufacturing overhead per direct labor-hour $3.60 During the current month the company started and finished Job M381. The following data were
recorded for this job: Job M381:FormingFinishingMachine-hours 80 30Direct labor-hours 30 40Direct materials$840$350Direct labor cost$750$1,000The predetermined overhead rate for the Finishing Department is closest to:
A. $13.00 per direct labor-hour
B. $9.40 per direct labor-hour
C. $5.35 per direct labor-hour
D. $3.60 per direct labor-hour
Answer: A
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