Claybrooks Corporation has two manufacturing departments--Casting and Assembly. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Casting Assembly Total Estimated total machine-hours (MHs) 3,000 2,000 5,000 Estimated total fixed manufacturing overhead cost $ 17,700 $ 5,800 $ 23,500 Estimated variable manufacturing overhead cost per MH $ 1.50 $ 2.20 Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. The departmental predetermined overhead rate in the Casting Department is closest to: $1.50 $7.40 $5.90 $6.48

The correct answer is B.

Explanation:

Giving the following information:

Casting:

Total Estimated total machine-hours (MHs) 3,000  Estimated total fixed manufacturing overhead cost $ 17,700

Estimated variable manufacturing overhead cost per MH $ 1.50

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= (17,700/3,000) + 1.50= $7.4 per machine hour

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