Question

Different companies use different bases in computing the predetermined overhead rates. From the following estimated data, compute the predetermined rate to be used by each company:

Company
Paper Rock Scissors
Machine-hours 100,000 210,000 125,000
Direct labor-hours 50,000 48,000 39,000
Direct labor cost $800,000 $735,000 $410,000
Manufacturing overhead cost $400,000 $432,000 $375,000

Basis for determining predetermined overhead rate:

Company Basis
Paper Direct labor cost
Rock Direct labor-hours
Scissors Machine-hours

Answer 1

To compute the predetermined overhead rates for each company, divide the manufacturing overhead cost by the respective basis. Paper Company's rate is 50%, Rock Company's rate is $9 per direct labor-hour, and Scissors Company's rate is $3 per machine-hour.

Step-by-step explanation:

To determine the predetermined overhead rate for each company, we need to divide the manufacturing overhead cost by the respective basis for each company.

For Paper Company:

Predetermined overhead rate = Manufacturing overhead cost / Direct labor cost

= $400,000 / $800,000

= 0.5 or 50%

For Rock Company:

Predetermined overhead rate = Manufacturing overhead cost / Direct labor-hours

= $432,000 / 48,000

= $9 or $9 per direct labor-hour

For Scissors Company:

Predetermined overhead rate = Manufacturing overhead cost / Machine-hours

= $375,000 / 125,000

= $3 or $3 per machine-hour

Answer 2

Paper Rock Scissors

Machine-hours (D / A) 4 2.06 3.00

Direct Labor-hours(D / B) 8 9 9.62

Direct Labor- cost (D / C) 0.5 0.59 0.91

Step-by-step explanation:

`(Cost\: Of \:Manufacturing \:Overhead)/(Cost \:Driver)= Overhead \:Rate`

We will dive the overhead among the roposer cost driver in each case:

Paper Rock Scissors

A.-Machine-hours 100,000 210,000 125,000

B.-Direct Labor-hours 50,000 48,000 39,000

C.- Direct Labor- cost 800,000 735,000 410,000

D.- overhead cost 400,000 432,000 375,000

Machine-hours (D / A) 4 2.06 3.00

Direct Labor-hours(D / B) 8 9 9.62

Direct Labor- cost (D / C) 0.5 0.59 0.91