The Watts Company Uses Predetermined Overhead Rates to Apply Manufacturing

The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs.The predetermined overhead rate is based on labour cost in Department A and on machine hours in Department B.At the beginning of the year,the company made the following estimates: $\begin{array}{|l|r|r|}\hline & \text { Department A } & \text { Department B } \\\hline \text { Direct labour cost } & \$ 30,000 & \$ 40,000 \\\hline \text { Manufacturing overhead } & \$ 60,000 & \$ 50,000 \\\hline \text { Direct labour hours } & 6,000 & 8,000 \\\hline \text { Machine hours } & 2,000 & 10,000 \\\hline\end{array}$ What predetermined overhead rates would be used in Departments A and B,respectively?

A) 50% and $8.00.
B) 50% and $5.00.
C) 110% and $15.00.
D) 200% and $5.00. Dept. A = $60,000/$30,000 = 200% Dept. B = $50,000/10,000m. hrs = $5/m. hr.

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