To compute the departmental predetermined overhead rates based on machine-hours, we need to calculate the overhead rates for each department separately. This involves using the following formula:

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

For each department, the total manufacturing overhead cost includes both fixed and variable components.

1. Molding Department

• Estimated Total Machine-Hours: 25,000
• Fixed Manufacturing Overhead Cost: $740,000
• Variable Manufacturing Overhead Cost per Machine-Hour: $5.00

Total Variable Overhead Cost for Molding:

$\text{Variable Overhead Cost} = \text{Variable Overhead Rate per Machine-Hour} \times \text{Machine-Hours}$ $= 5.00 \times 25,000 = \$125,000$

Total Manufacturing Overhead Cost for Molding:

$\text{Total Overhead Cost} = \text{Fixed Overhead Cost} + \text{Total Variable Overhead Cost}$ $= 740,000 + 125,000 = \$865,000$

Molding Department Predetermined Overhead Rate:

$\text{Molding Department Rate} = \frac{865,000}{25,000} = \$34.60 \text{ per machine-hour}$

2. Fabrication Department

• Estimated Total Machine-Hours: 33,000
• Fixed Manufacturing Overhead Cost: $300,000
• Variable Manufacturing Overhead Cost per Machine-Hour: $2.00

Total Variable Overhead Cost for Fabrication:

$\text{Variable Overhead Cost} = \text{Variable Overhead Rate per Machine-Hour} \times \text{Machine-Hours}$ $= 2.00 \times 33,000 = \$66,000$

Total Manufacturing Overhead Cost for Fabrication:

$\text{Total Overhead Cost} = \text{Fixed Overhead Cost} + \text{Total Variable Overhead Cost}$ $= 300,000 + 66,000 = \$366,000$

Fabrication Department Predetermined Overhead Rate:

$\text{Fabrication Department Rate} = \frac{366,000}{33,000} = \$11.09 \text{ per machine-hour}$

Summary of Departmental Predetermined Overhead Rates:

• Molding Department: $34.60 per machine-hour
• Fabrication Department: $11.09 per machine-hour

These rates will be used to apply manufacturing overhead to jobs based on the machine-hours worked in each department.

Would you like to know more details about how these rates will affect the job costs? Here are some questions for you to consider:

1. How would the total cost of each job differ using plantwide versus departmental rates?
2. How do changes in machine-hours impact the overhead applied in each department?
3. What are the advantages of using departmental rates over a plantwide rate?
4. How might Delph's cost estimation process affect the accuracy of the overhead rates?
5. What happens if the actual overhead costs differ from the estimated overhead?

Tip: Always review overhead allocation methods regularly to ensure they accurately reflect the costs incurred, especially when changes occur in production processes or overhead costs.