Cost Accounting Quiz: Departmental Overhead Rates
14 questions · exam conditions
0:00
Departmental Overhead RatesQuestion 1 of 14

Preston Manufacturing has two departments, Machining and Assembly. The overhead rate is $30 per machine hour in Machining and 150% of direct labor cost in Assembly. Job #434 has the following costs:

  • Direct Materials: $15,000
  • Machining Dept: 200 machine hours, $4,000 direct labor cost
  • Assembly Dept: 50 machine hours, $6,000 direct labor cost

What is the total overhead applied to Job #434?

$6,000
$9,000
$15,000
$22,500
← Back to quizzes

Cost Accounting Quiz

Cost Accounting Quiz: Departmental Overhead Rates

Practice Departmental Overhead Rates in Cost Accounting with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Departmental Overhead Rates, giving you a quick way to practice the rules, question types, and explanations that matter most for Cost Accounting.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Preston Manufacturing has two departments, Machining and Assembly. The overhead rate is $30 per machine hour in Machining and 150% of direct labor cost in Assembly. Job #434 has the following costs:

  • Direct Materials: $15,000
  • Machining Dept: 200 machine hours, $4,000 direct labor cost
  • Assembly Dept: 50 machine hours, $6,000 direct labor cost

What is the total overhead applied to Job #434?

  1. $6,000
  2. $9,000
  3. $15,000 (correct answer)
  4. $22,500
Explanation: Calculate the applied overhead for each department using its specific base and sum them.
  1. Machining Department Overhead:
    • Base: Machine hours.
    • Applied OH = 200 machine hours * ($30)/hour = ($6,000).
  2. Assembly Department Overhead:
    • Base: Direct labor cost.
    • Applied OH = 150% * (6,000=6,000 = 9,000).
  3. Total Applied Overhead:
    • Total = (6,000(Machining)+6,000 (Machining) + 9,000 (Assembly) = $15,000).
The direct materials cost and the direct labor cost in the Machining department are irrelevant for calculating total applied overhead.

Question 2

Rigby Corp. uses departmental overhead rates. The Molding department rate is $18 per direct labor hour (DLH), and the Polishing department rate is $25 per machine hour (MH). Job 550 incurred total direct materials costs of $12,000 and total direct labor costs of $8,000. The job required 150 DLH in Molding and 200 MH in Polishing. What is the total manufacturing cost of Job 550?

  1. $7,700
  2. $20,000
  3. $27,700 (correct answer)
  4. $30,250
Explanation: The total manufacturing cost is the sum of direct materials, direct labor, and applied manufacturing overhead.
  1. Calculate Applied Overhead:
    • Molding OH = 150 DLH * ($18)/DLH = ($2,700).
    • Polishing OH = 200 MH * ($25)/MH = ($5,000).
    • Total Applied OH = (2,700+2,700 + 5,000 = $7,700).
  2. Calculate Total Manufacturing Cost:
    • Total Cost = Direct Materials + Direct Labor + Total Applied OH
    • Total Cost = (12,000+12,000 + 8,000 + 7,700=7,700 = 27,700).

Question 3

Forrest Industries has two production departments: Cutting and Welding. The predetermined overhead rate in Cutting is $20 per machine hour, and in Welding, it is $15 per direct labor hour. For a particular job, the total applied overhead was $1,500. The job required 45 machine hours in the Cutting department. How many direct labor hours did the job require in the Welding department?

  1. 40 hours (correct answer)
  2. 60 hours
  3. 70 hours
  4. 100 hours
Explanation: This problem requires working backward from the total applied overhead.
  1. Calculate the overhead applied by the Cutting department:
    • Cutting OH = 45 machine hours * ($20)/hour = ($900).
  2. Determine the overhead applied by the Welding department:
    • Welding OH = Total Applied OH - Cutting OH = (1,500−1,500 - 900 = $600).
  3. Calculate the direct labor hours used in the Welding department:
    • Welding DLH = Welding OH / Welding Rate = (600/600 / 15) per hour = 40 hours.

Question 4

Mercury Corp. uses departmental overhead rates. The Assembly department's budgeted overhead is $500,000, and the Finishing department's is $300,000. Assembly uses 25,000 budgeted machine hours, and Finishing uses 20,000 budgeted direct labor hours as their respective allocation bases.

Job 202 used 10% of the Assembly department's budgeted machine hours and 5% of the Finishing department's budgeted direct labor hours for the period. What is the total overhead allocated to Job 202?

  1. $80,000
  2. $40,000
  3. $65,000 (correct answer)
  4. $53,000
Explanation: This question can be solved without calculating the rates. The overhead applied is a direct proportion of the activity base used.
  1. Assembly Overhead Applied: Since the job used 10% of the budgeted machine hours, it will be allocated 10% of the Assembly department's budgeted overhead.
    • Assembly OH = 10% * (500,000=500,000 = 50,000).
  2. Finishing Overhead Applied: Since the job used 5% of the budgeted direct labor hours, it will be allocated 5% of the Finishing department's budgeted overhead.
    • Finishing OH = 5% * (300,000=300,000 = 15,000).
  3. Total Overhead Applied:
    • Total OH = (50,000+50,000 + 15,000 = $65,000).
Alternatively, one could calculate the rates and hours, which yields the same result:
  • Assembly Rate = $500k/25k MH = $20/MH. Job Hours = 10% * 25k = 2,500 MH. OH = 2,500 * $20 = $50,000.
  • Finishing Rate = $300k/20k DLH = $15/DLH. Job Hours = 5% * 20k = 1,000 DLH. OH = 1,000 * $15 = $15,000.
  • Total = $50,000 + $15,000 = $65,000.

Question 5

At the beginning of the year, Jupiter Corp. established the following departmental overhead rates:

  • Department A: $25 per machine hour
  • Department B: $16 per direct labor hour

At year-end, the company's records showed that total overhead applied to all jobs was $820,000. The records also showed that a total of 20,000 machine hours were worked in Department A for all jobs.

Given the information from Jupiter Corp.'s records, what was the total number of direct labor hours worked in Department B during the year?

  1. 20,000 hours (correct answer)
  2. 31,250 hours
  3. 51,250 hours
  4. 32,800 hours
Explanation: This problem requires isolating the overhead applied in Department B and then working backward to find the activity level.
  1. Calculate Total Overhead Applied in Department A:
    • Dept. A Applied OH = 20,000 machine hours * ($25)/hour = ($500,000).
  2. Calculate Total Overhead Applied in Department B:
    • Total Applied OH = Dept. A Applied OH + Dept. B Applied OH
    • (820,000=820,000 = 500,000) + Dept. B Applied OH
    • Dept. B Applied OH = (820,000−820,000 - 500,000 = $320,000).
  3. Calculate Direct Labor Hours in Department B:
    • Dept. B DLH = Dept. B Applied OH / Dept. B Rate
    • Dept. B DLH = (320,000/320,000 / 16) per hour = 20,000 hours.

Question 6

A company with two production departments, A and B, applies overhead using departmental rates. Department A's rate is $10 per machine hour, and Department B's rate is $20 per machine hour. Job #101 used 30 machine hours in Department A and 50 machine hours in Department B. Job #102 used 60 machine hours in Department A and 10 machine hours in Department B. What is the difference in total overhead applied between Job #101 and Job #102?

  1. Job #101 has $500 more overhead. (correct answer)
  2. Job #102 has $500 more overhead.
  3. Job #101 has $800 more overhead.
  4. Job #102 has $800 more overhead.
Explanation: Calculate the total applied overhead for each job and then find the difference.
  1. Calculate Overhead for Job #101:
    • Dept. A OH = 30 MH * ($10)/MH = ($300).
    • Dept. B OH = 50 MH * ($20)/MH = ($1,000).
    • Total OH for Job #101 = (300+300 + 1,000 = $1,300).
  2. Calculate Overhead for Job #102:
    • Dept. A OH = 60 MH * ($10)/MH = ($600).
    • Dept. B OH = 10 MH * ($20)/MH = ($200).
    • Total OH for Job #102 = (600+600 + 200 = $800).
  3. Find the Difference:
    • Difference = (1,300 (Job #101) - 800 (Job #102) = $500).
    • Job #101 has ($500) more applied overhead than Job #102.

Question 7

Sterling Products is analyzing the cost of two of its products, Alpha and Gamma. The company uses a departmental overhead allocation system. The Machining department allocates overhead at $50 per machine hour, and the Assembly department allocates overhead at $20 per direct labor hour. Production information for the two products is as follows:

  • Product Alpha: requires 4 machine hours and 1 direct labor hour per unit.
  • Product Gamma: requires 1 machine hour and 6 direct labor hours per unit.

If Sterling Products switched to a plantwide overhead rate of $30 per direct labor hour, how would the reported overhead cost per unit of Product Gamma be affected?

  1. Increase by $50
  2. Decrease by $10
  3. Decrease by $50
  4. Increase by $10 (correct answer)
Explanation: First, calculate the overhead cost for Gamma using the departmental rates. Then, calculate it using the plantwide rate and find the difference.
  1. Departmental Rate Cost for Gamma:
    • Machining OH = 1 MH * ($50)/MH = ($50).
    • Assembly OH = 6 DLH * ($20)/DLH = ($120).
    • Total Departmental OH = (50+50 + 120 = $170).
  2. Plantwide Rate Cost for Gamma:
    • Total Plantwide OH = 6 DLH * ($30)/DLH = ($180).
  3. Compare Costs:
    • Change = Plantwide Cost - Departmental Cost = (180−180 - 170 = $10).
    • The cost would increase by ($10).

Question 8

A company establishes a predetermined overhead rate of $50 per machine hour for its Machining department and $20 per direct labor hour for its Assembly department. The direct labor rate is $25 per hour. A job requires 100 machine hours in Machining (with no direct labor) and 150 direct labor hours in Assembly. Direct materials for the job cost $10,000. What is the total conversion cost for this job?

  1. $8,000
  2. $11,750 (correct answer)
  3. $18,000
  4. $21,750
Explanation: Conversion cost is the sum of direct labor and applied manufacturing overhead. Direct materials are excluded.
  1. Calculate Total Direct Labor Cost:
    • Total DL Cost = 150 DLH × $25/DLH = $3,750.
  2. Calculate Total Applied Overhead:
    • Machining OH = 100 MH × $50/MH = $5,000.
    • Assembly OH = 150 DLH × $20/DLH = $3,000.
    • Total Applied OH = $5,000 + $3,000 = $8,000.
  3. Calculate Total Conversion Cost:
    • Conversion Cost = Total DL Cost + Total Applied OH = $3,750 + $8,000 = $11,750.

Question 9

Cypress Manufacturing uses departmental overhead rates. In the Assembly department, the budgeted overhead is $450,000 and the predetermined rate is $30 per direct labor hour. In the Finishing department, the budgeted overhead is $600,000 based on 30,000 budgeted machine hours. A specific job required 40 direct labor hours in Assembly and 50 machine hours in Finishing. What is the total overhead cost applied to this job?

  1. $2,200 (correct answer)
  2. $1,950
  3. $1,800
  4. $2,350
Explanation: This problem requires calculating one rate and using a given rate to find the total applied overhead.
  1. Assembly Department Overhead: The rate is given as ($30) per DLH.
    • Applied OH = 40 DLH * ($30)/DLH = ($1,200).
  2. Finishing Department Overhead: First, calculate the rate.
    • Rate = ($600,000 / 30,000) MH = ($20) per MH.
    • Applied OH = 50 MH * ($20)/MH = ($1,000).
  3. Total Applied Overhead:
    • Total = (1,200(Assembly)+1,200 (Assembly) + 1,000 (Finishing) = $2,200).

Question 10

A manufacturing company has two production departments, P1 and P2, and one service department, S1. Budgeted overhead costs are $50,000 for P1, $70,000 for P2, and $30,000 for S1. The cost of S1 is allocated to the production departments based on the number of employees. P1 has 60 employees and P2 has 90 employees. P1 allocates its overhead based on 10,000 machine hours, and P2 allocates its overhead based on 20,000 direct labor hours. What is the predetermined overhead rate for department P1?

  1. $5.00 per machine hour
  2. $6.20 per machine hour (correct answer)
  3. $6.80 per machine hour
  4. $8.00 per machine hour
Explanation: This calculation requires a first-stage allocation of the service department cost.
  1. Allocate S1's cost to P1 and P2. Total employees = 60 + 90 = 150.
    • Allocation to P1 = ($30,000 * (60 / 150)) = ($12,000).
  2. Determine the total overhead in P1.
    • Total P1 Overhead = Budgeted P1 OH + Allocated S1 OH = (50,000+50,000 + 12,000 = $62,000).
  3. Calculate P1's overhead rate.
    • P1 Rate = Total P1 Overhead / P1 Allocation Base = ($62,000 / 10,000) machine hours = ($6.20) per machine hour.

Question 11

Kramer Industries has two departments, Mixing and Packaging. The company estimates the following for the year: Mixing will have $300,000 of overhead and 20,000 machine hours. Packaging will have $150,000 of overhead and 10,000 direct labor hours. The company uses departmental rates.

During the year, the Mixing department incurs actual overhead of $320,000 and runs for 22,000 machine hours. What is the over- or underapplied overhead for the Mixing department?

  1. $10,000 overapplied (correct answer)
  2. $20,000 underapplied
  3. $10,000 underapplied
  4. $30,000 overapplied
Explanation: The question asks for the over/underapplied overhead for a single department.
  1. Calculate the Predetermined Overhead Rate for Mixing:
    • Rate = Budgeted OH / Budgeted Activity = ($300,000 / 20,000) MH = ($15) per MH.
  2. Calculate the Overhead Applied for Mixing:
    • Applied OH = Actual Activity * Predetermined Rate = 22,000 MH * ($15)/MH = ($330,000).
  3. Compare Applied Overhead to Actual Overhead:
    • Difference = Applied OH - Actual OH = (330,000−330,000 - 320,000 = $10,000).
    • Since applied overhead is greater than actual overhead, the result is ($10,000) overapplied.

Question 12

A company with a labor-intensive assembly department and a machine-intensive fabrication department switches from a plantwide overhead rate based on direct labor hours to departmental rates. The fabrication department has significantly higher overhead costs than the assembly department. Which of the following outcomes is most likely?

  1. Jobs that spend more time in fabrication will be assigned less overhead cost than before.
  2. Jobs that spend more time in assembly will be assigned more overhead cost than before.
  3. The cost of all jobs will increase due to the more complex allocation method.
  4. Jobs that spend more time in fabrication will be assigned more overhead cost than before. (correct answer)
Explanation: A plantwide rate based on direct labor hours will under-allocate costs to jobs that are low in labor but high in machine usage (fabrication-intensive jobs) and over-allocate costs to jobs that are high in labor but low in machine usage (assembly-intensive jobs). By switching to departmental rates, the high costs of the machine-intensive fabrication department will be more accurately assigned to the jobs that use those resources. Therefore, jobs spending more time in fabrication will be assigned more overhead cost.

Question 13

Precision Parts uses departmental overhead rates and has gathered the following information:

  • Fabrication Department: $$$420,000estimatedoverhead,estimated overhead,21,000$ estimated direct labor hours
  • Finishing Department: $$ 280,000280,000 estimated overhead, 14,00014,000 estimated machine hours

Job #348\#348 spent 1818 direct labor hours in Fabrication and 88 machine hours in Finishing. However, due to a computational error, the Fabrication Department's overhead was initially calculated using 20,00020,000 direct labor hours instead of 21,00021,000. What is the difference between the overhead allocated using the incorrect rate versus the correct rate for this job?

  1. The incorrect rate allocated $$ 1818 more overhead to the job than the correct rate (correct answer)
  2. The incorrect rate allocated $$ 2424 more overhead to the job than the correct rate
  3. The incorrect rate allocated $$ 3636 more overhead to the job than the correct rate
  4. The incorrect rate allocated $$ 4242 more overhead to the job than the correct rate
Explanation: Correct Fabrication rate = $420,000 ÷ 21,000 = $20 per DLH. Incorrect Fabrication rate = $420,000 ÷ 20,000 = $21 per DLH. For Job #348: Incorrect allocation = 18 × $21 = $378. Correct allocation = 18 × $20 = $360. Difference = $378 - $360 = $18. The incorrect rate allocated $18 more overhead than the correct rate.

Question 14

Meridian Industries has two production departments that use different allocation bases for overhead. Department α\alpha allocates overhead based on direct labor cost at a rate of 2.20$ per direct labor dollar. Department $\beta$ allocates overhead based on machine hours at $$ $28$ per machine hour. A batch of products requires 1,800indirectlaborcostinDepartmentin direct labor cost in Department\alphaandand22machinehoursinDepartmentmachine hours in Department\beta.IfDepartment. If Department \alpha's overhead rate was understated by $$ 0.15$ per direct labor dollar due to an estimation error, what is the amount of underapplied overhead for this batch?

  1. $$270$ (correct answer)
  2. $$225$
  3. $$315$
  4. $$180$
Explanation: The understated rate means actual overhead costs are higher than estimated. Applied overhead using understated rate: Department α: $1,800 × $2.20 = $3,960. Department β: 22 × $28 = $616. Total applied = $4,576. Actual overhead should have been calculated using the correct rate: Department α: 1,800×(1,800 × (2.20 + $0.15) = $1,800 × $2.35 = $4,230. Department β remains the same at $616. Total actual = $4,846. Underapplied overhead = $4,846 - $4,576 = $270.