Question: Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labour cost basis in Department A and on a machine

Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labour cost basis in Department A and on a machine hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates:

Department A Department B
Direct labour cost $56,000 $33,000
Manufacturing overhead $67,200 $45,000
Direct labour hours 8,000 9,000
Machine hours 4,000 15,000

What predetermined overhead rate would be used in Departments A and B, respectively?

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