Question

Frinut Company estimates the following overhead costs for the coming year: Equipment depreciation $250,000 Equipment maintenance 50,000 Supervisory salaries 20,000 Factory rent 100,000 Total $420,000 Frinut budgeted $600,000 in direct labor costs and 14,000 machine hours for the coming year. (a) Incorrect answer iconYour answer is incorrect. Calculate the predetermined overhead rate using direct labor costs as the allocation base. (Round answer to 2 decimal places, e.g. 15.25.) Predetermined overhead rate $enter the predetermined overhead rate in dollars per direct labor 1.7 per direct labor Attempts: 1 of 1 used (b) Incorrect answer iconYour answer is incorrect. Calculate the predetermined overhead rate using machine hours as the allocation base. (Round answer to 2 decimal places, e.g. 15.25.) Predetermined overhead rate $enter the predetermined overhead rate in dollars per machine hour 72.86 per machine hour

Answer 1

$0.70 per direct labor hour

$30 per direct labor hour

Step-by-step explanation:

The computation is shown below:

a. For predetermined overhead rate using direct labor costs is

= Estimated overhead ÷ estimated direct labor cost

= $420,000 ÷ $600,000

= $0.70 per direct labor hour

b. For the predetermined overhead rate using machine hours is

= Estimated overhead ÷ estimated machine hours

= $420,000 ÷ 14,000 machine hours

= $30 per direct labor hour