Question

Marquis Company estimates that annual manufacturing overhead costs will be $900,000. Estimated annual operating activity bases are direct labor cost $500,000, direct labor hours 50,000, and machine hours 100,000. Compute the predetermined overhead rate for each activity base. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.) Overhead rate per direct labor cost enter percentages rounded to 2 decimal places % Overhead rate per direct labor hour $enter a dollar amount rounded to 2 decimal places Overhead rate per machine hour $enter a dollar amount rounded to 2 decimal places

Answer 1

Answer:

Basis                                  Rate

Labour hour              $18  per direct labour

Machine hour             $9  per machine hour

Budgeted labour cost  180% of labour cost

Explanation:

Predetermined overhead absorption rate=

Estimated Overhead for the period/Estimated activity level

Labour hour basis

Estimated Overhead for the period/Estimated labour hours

= $900,000/50,000

=$18  per direct labour

Machine hour basis

Estimated Overhead for the period/Estimated machine hours

Overhead rate per machine hour = $900,000/100,000 hours

                                              =$9  per machine hour

Direct labour cost basis

Pre-determined overhead rate = Estimated Overhead for the period/Estimated labour cost

=$900,000/($500,000)×100

=180 % of labour cost

Basis                       Rate

Labour hour         =$18  per direct labour

Machine hour        =$9  per machine hour

Budgeted labour cost  180% of labour cost