To compute the departmental predetermined overhead rates for Delph Company, we need to calculate the overhead rate for each department based on machine-hours. This is done by dividing the total estimated manufacturing overhead cost for each department by the total estimated machine-hours for that department.

Formula:

$\text{Predetermined Overhead Rate} = \frac{\text{Total Estimated Overhead Cost}}{\text{Total Estimated Machine-Hours}}$

The overhead cost includes both fixed manufacturing overhead and variable manufacturing overhead. So, for each department, we need to add the fixed overhead and the variable overhead (calculated as variable cost per machine-hour times machine-hours) and then divide the total by the machine-hours.

1. Molding Department:

• Estimated machine-hours = 21,000
• Fixed manufacturing overhead cost = $780,000
• Variable manufacturing overhead cost per machine-hour = $5.00

Variable Overhead: $\text{Variable Overhead} = 21,000 \times 5.00 = 105,000$

Total Overhead for Molding: $\text{Total Overhead} = 780,000 + 105,000 = 885,000$

Predetermined Overhead Rate for Molding: $\text{Predetermined Overhead Rate} = \frac{885,000}{21,000} = 42.14 \text{ per machine-hour}$

2. Fabrication Department:

• Estimated machine-hours = 34,000
• Fixed manufacturing overhead cost = $240,000
• Variable manufacturing overhead cost per machine-hour = $2.00

Variable Overhead: $\text{Variable Overhead} = 34,000 \times 2.00 = 68,000$

Total Overhead for Fabrication: $\text{Total Overhead} = 240,000 + 68,000 = 308,000$

Predetermined Overhead Rate for Fabrication: $\text{Predetermined Overhead Rate} = \frac{308,000}{34,000} = 9.06 \text{ per machine-hour}$

Summary:

• Molding Department Overhead Rate: $42.14 per machine-hour
• Fabrication Department Overhead Rate: $9.06 per machine-hour

Would you like to calculate the total overhead applied to specific jobs (e.g., Job D-70 and Job C-200) using these rates?

Here are five questions to explore this topic further:

1. How does using departmental overhead rates improve cost accuracy compared to a plantwide rate?
2. How would changing machine-hours estimates affect the predetermined overhead rates?
3. What are the advantages and disadvantages of using machine-hours as a basis for overhead allocation?
4. How do fixed and variable overhead costs impact job profitability in job-order costing?
5. Can the overhead rates vary if more departments are added?

Tip: Departmental overhead rates provide better cost control and accuracy by matching overhead costs more closely with the resources used in each department.