Question at position 15 Huang Aerospace Corporation manufactures aviation control panels in two departments, Fabrication and Assembly. In the Fabrication department, Huang uses a predetermined overhead rate of $30 per machine-hour. In the Assembly department, Huang uses a predetermined overhead rate of $12 per direct labor-hour. During the current year, Job number X2984 incurred the following number of hours in each department: [table]
| Fabrication | Assembly Machine-hours | 40 | 12 Direct labor-hours | 3 | 25
[/table] What is the total amount of manufacturing overhead that Huang should have applied to Job number X2984 during the current year? $1,500$1,734$1,560$1,200

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BlackTom AI · Accepted Answer

Question restatement: Huang Aerospace Corporation applies manufacturing overhead using two predetermined rates: $30 per machine-hour in Fabrication and $12 per direct labor-hour in Assembly. For Job X2984, Fabrication used 40 machine-hours and Assembly used 25 direct labor-hours. The questions asks for the total manufacturing overhead applied to this job.

Option analysis step by step:
Option 1: $1,500
- Calculation for Fabrication: 40 machine-hours × $30 per machine-hour = $1,200.
- Calculation for Assembly: 25 direct labor-hours × $12 per direct labor-hour = $300.
- Total overhead = $1,200 + $300 = $1,500.
- This matches the sum of the two department applications, so this option is consistent with the problem data.

Option 2: $1,734
- This value suggests a combination or miscalculation beyond simple per-department application. If one tried to reach $1,734, they would need an extra $234 of overhead with no basis from the given rates and activity measures (40 machine-hours at $30 gives $1,200 and 25 direct labor-hours at $12 gives $300; there is no other allocation or factor provided). Therefore this option is not supported by the described costing approach.

Option 3: $1,560
- Compare to the correct per-department totals: $1,200 (Fabrication) + $300 (Assembly) = $1,500. The figure $1,560 would require an additional $60 beyond the calculated amounts. Since the problem specifies only the two predetermined rates applied to the given hours, there is no basis for an extra $60 overhead under the stated method.

Option 4: $1,200
- This value corresponds to only the Fabrication overhead ($1,200) and neglects the Assembly overhead entirely. Since Job X2984 also incurred 25 direct labor-hours in Assembly, applying only Fabrication overhead omits a portion of the total overhead that should be allocated under the described system.

Summary of reasoning across options: The overhead in Fabrication is 40 × 30 = 1,200, and the overhead in Assembly is 25 × 12 = 300. Adding them yields 1,500. The other options either over- or under-count by omitting one component or adding unsupported amounts, which contradicts the given rates and hours. The calculation aligns with applying each department’s rate to its respective activity measure and summing the results.

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Similar Questions

A predetermined overhead rate is calculated by dividing estimated total manufacturing overhead cost by estimated units in the allocation base.

A company with two departments—one labour-intensive and one machine-intensive—wants to improve overhead allocation accuracy. Which method is least likely to reduce cost distortion?

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