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Question - Garza Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing 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:
Casting
Customizing
Machine-hours
20,000
13,000
Direct labor-hours
1,000
7,000
Total fixed manufacturing overhead cost
$152,000
$68,600
Variable manufacturing overhead per machine- hour
$2.10
Variable manufacturing overhead per direct labor-hour
$4.30
Required - Find the predetermined overhead rate for the Casting Department?
a. $7.60 per machine-hour
b. $27.71 per machine-hour
c. $2.10 per machine-hour
d. $9.70 per machine-hour
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