Question

Waldman Pools manufactures swimming pool equipment. Waldman estimates total manufacturing overhead costs next year to be $ 1 comma 200 comma 000. Waldman also estimates it will use 40 comma 000 direct labor hours and incur $ 800 comma 000 of direct labor cost next year. Inâ addition, the machines are expected to be run for 30 comma 000 hours. Compute the predetermined manufacturing overhead rate for next year under the following independentâ situations: 1. Assume that the company uses direct labor hours as its manufacturing overhead allocation base. 2. Assume that the company uses direct labor cost as its manufacturing overhead allocation base. 3. Assume that the company uses machine hours as its manufacturing overhead allocation base.

Answer 1

Answer: 200

Step-by-step explanation:

Answer 2

1. $30 per direct labor hours

2. $.15

3. $40 per machine hours

Step-by-step explanation:

The computation is shown below:

We know that

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated cost drivers)

So,

In the first case, the predetermined overhead rate equal to

= (Total estimated manufacturing overhead) ÷ (estimated direct labors hours)

= ($1,200,000) ÷ (40,000 direct labor hours)

= $30 per direct labor hours

2, In the second case, the predetermined overhead rate equal to

= (Total estimated manufacturing overhead) ÷ (estimated direct labors cost)

= ($1,200,000) ÷ ($800,000)

= $1.5

3. In the third case, the predetermined overhead rate equal to

= (Total estimated manufacturing overhead) ÷ (estimated machine hours)

= ($1,200,000) ÷ (30,000 machine hours)

= $40 per machine hours