Question

Marquis Company estimates that annual manufacturing overhead costs will be $900,000. Estimated annual operating activity bases are: direct labor cost $500,000, direct labor hours 50,000, and machine hours 100,000. Compute the predetermined overhead rate for each activity base.

Answer 1

Results are below.

Step-by-step explanation:

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Direct labor cost:

Predetermined manufacturing overhead rate= 900,000 / 500,000

Predetermined manufacturing overhead rate= $1.8 per direct labor dollar

Direct labor hours:

Predetermined manufacturing overhead rate= 900,000 / 50,000

Predetermined manufacturing overhead rate= $18 per direct labor hour

Machine-hour:

Predetermined manufacturing overhead rate= 900,000 / 100,000

Predetermined manufacturing overhead rate= $9 per machine hour