Combs Manufacturing Company uses predetermined overhead rates based on direct labor.The Company budgeted to spend $750,000 on labor during the period.Combs estimates annual variable overhead to be $225,000 and annual fixed overhead to be $900,000.What are Comb's overhead variable and fixed rates?

Question

Quizplus · Accepted Answer

The variable overhead rate is calculated as the estimated variable overhead divided by the estimated amount of the allocation base (in this case, labor). So, $225,000 / $750,000 = $0.30 per labor dollar. The fixed overhead rate is calculated as the estimated fixed overhead divided by the estimated amount of the allocation base. So, $900,000 / $750,000 = $1.20 per labor dollar.

Combs Manufacturing Company Uses Predetermined Overhead Rates Based on Direct