Question

Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 135,000 units per year. The total budgeted overhead at normal capacity is $877,500 comprised of $337,500 of variable costs and $540,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.

During the current year, Byrd produced 78,100 putters, worked 87,600 direct labor hours, and incurred variable overhead costs of $152,295 and fixed overhead costs of $452,650.

Required:
Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Estimated direct labor hours= 135,000

Estimated varaible overhead= $337,500

Estimated fixed overhead= $540,000

To calculate the predetermined 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

Variable:

Predetermined manufacturing overhead rate= 337,500/135,000= $2.5 per direct labor hour

Fixed:

Predetermined manufacturing overhead rate= 540,000/135,000= $4 per direct labor hour