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

Answer:

                           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

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

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