Problem: 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:
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Casting
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Customizing
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Machine-hours
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20,000
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13,000
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Direct labor-hours
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1,000
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7,000
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Total fixed manufacturing overhead cost
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$152,000
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$68,600
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Variable manufacturing overhead per machine- hour
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$2.10
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Variable manufacturing overhead per direct labor-hour
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$4.30
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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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