Let’s say that,
Manufacturing Overhead Cost = MOC
A= Division A
B = Division B
Working Time = T (either machine hours or labor hours)
The given variables are:
MOC (A) = $160,000
MOC (B) = $360,000
T (A) = 30,000 machine hours
T (B) = 21,000 labor hours
We are asked to find for the predetermined Overhead Allocation Rates. This is calculated using the formula:
Overhead Allocation Rates = MOC / T
Overhead Allocation Rate (A) = $160,000 / 30,000 machine hours
Overhead Allocation Rate (A) = $5.33 per machine hour
Overhead Allocation Rate (B) = $360,000 / 21,000 labor hours
Overhead Allocation Rate (B) = $17.14 per labor hour