Question

A company produces surgical equipment that goes through threes processes, 1A1, 2B2, and 3C3, before they are complete. Expected costs and activities for the three departments are shown below. All departments have departmental overhead rates based on direct labor hours. Therefore, the overhead rate for each department is $5 per direct labor hour.

Department 1A1 Department 2B2 Department 3C3
Machine hours 15,000 MH 25,000 MH 20,000 MH
Direct labor hours 22,830 DLH 10,650 DLH 29,200 DLH
Overhead costs $114,150 $213,000 $73,000

Answer

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