Question

Marquis Company estimates that annual manufacturing overhead costs will be $825,000. Estimated annual operating activity bases are direct labor cost $450,000, direct labor hours 53,000, and machine hours 105,000.

Compute the predetermined overhead rate for each activity base.

Answer 1

To compute the predetermined overhead rate for each activity base, divide the estimated annual manufacturing overhead costs by the corresponding activity base.

Step-by-step explanation:

To compute the predetermined overhead rate for each activity base, you need to divide the estimated annual manufacturing overhead costs by the corresponding activity base. Let's go through each activity base:

1. Direct Labor Cost: The predetermined overhead rate is $825,000 / $450,000 = $1.83 per dollar of direct labor cost.

2. Direct Labor Hours: The predetermined overhead rate is $825,000 / 53,000 = $15.57 per direct labor hour.

3. Machine Hours: The predetermined overhead rate is $825,000 / 105,000 = $7.86 per machine hour.