Tasty Bakery produces donuts which go through two operations, mixing and baking, before they are ready to be packaged. Next year's expected costs and activities are shown below.

\begin{tabular}{|l|r|r|}
\hline
& Mixing & Baking \\
\hline
Direct labor hours & [tex]$300,000 \, \text{DLH}$[/tex] & [tex]$70,000 \, \text{DLH}$[/tex] \\
\hline
Machine hours & [tex]$1,000,000 \, \text{MH}$[/tex] & [tex]$801,000 \, \text{MH}$[/tex] \\
\hline
Overhead costs & [tex]$\$[/tex] 500,000[tex]$ & $[/tex]\[tex]$ 300,000$[/tex] \\
\hline
\end{tabular}

When calculating the departmental overhead rate, the numerator should be:

A. The actual quantity of the departmental allocation base used by the job
B. The total amount of departmental allocation base
C. The total budgeted overhead cost
D. The total estimated departmental overhead cost

Question

13-07-2024
Business

Answered

Tasty Bakery produces donuts which go through two operations, mixing and baking, before they are ready to be packaged. Next year's expected costs and activities are shown below.

\begin{tabular}{|l|r|r|}
\hline
& Mixing & Baking \\
\hline
Direct labor hours & [tex]$300,000 \, \text{DLH}$[/tex] & [tex]$70,000 \, \text{DLH}$[/tex] \\
\hline
Machine hours & [tex]$1,000,000 \, \text{MH}$[/tex] & [tex]$801,000 \, \text{MH}$[/tex] \\
\hline
Overhead costs & [tex]$\$[/tex] 500,000[tex]$ & $[/tex]\[tex]$ 300,000$[/tex] \\
\hline
\end{tabular}

When calculating the departmental overhead rate, the numerator should be:

A. The actual quantity of the departmental allocation base used by the job
B. The total amount of departmental allocation base
C. The total budgeted overhead cost
D. The total estimated departmental overhead cost

Answer :

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GinnyAnswer GinnyAnswer · Answer 1 · 2024-07-13T22:22:27-04:00

When calculating the departmental overhead rate, the numerator should be the total budgeted overhead cost. This cost represents the total expected overhead expenses for the department and is used as the basis for determining how much overhead should be allocated to each direct labor hour or machine hour used in production.

In the context of Tasty Bakery, as provided:
- The total budgeted overhead cost is $500,000.

Given this information, the correct detail for the numerator in calculating the departmental overhead rate is:

The total budgeted overhead cost.