Garza Corporation Has Two Production Departments, Casting and Customizing

Multiple Choice

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: The predetermined overhead rate for the Casting Department is closest to:

A) $9.70 per machine-hour
B) $7.60 per machine-hour
C) $2.10 per machine-hour
D) $27.71 per machine-hour