Question

Marquis Company estimates that annual manufacturing overhead costs will be $822,000. Estimated annual operating activity bases are direct labor cost $414,000, direct labor hours 51,000, and machine hours 109,000.

Compute the predetermined overhead rate for each activity base. (Round answers to 2 decimal places, e.g. 10.50.)

Answer 1

direct labor cost $ 1,99 overhead per dollar of labor

direct labor hours $ 16,12 overhead per labor hour

machine hours $ 7,54 overhead per machine hour

Step-by-step explanation:

We will sovle for the predeterminated overhead rate considering each of the three cost driver (activity base)

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

We divide the expected overhead over the cost driver chose by the company. In this case we have thre candidates:

direct labor cost:

822,000 / 414,000 =1,9855

direct labor hours

822,000 / 51,000 = 16,117647

machine hours

822,000 / 109,000 = 7,5412844