Cranston Company estimates the following overhead costs for the coming year:
Equipment depreciation $160,000
Equipment maintenance 60,000
Supervisory salaries 40,000
Factory rent 100,000
Total $360,000

Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for the coming year.
(a)Calculate the predetermined overhead rate using direct labor costs as the allocation base.
(b)Calculate the predetermined overhead rate using machine hours as the allocation base.

Question

Cranston Company estimates the following overhead costs for the coming year:
Equipment depreciation $160,000
Equipment maintenance 60,000
Supervisory salaries 40,000
Factory rent ​ 100,000
Total $360,000
​
Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for the coming year.
(a)Calculate the predetermined overhead rate using direct labor costs as the allocation base.
(b)Calculate the predetermined overhead rate using machine hours as the allocation base.

Quizplus · Accepted Answer

The Answer of Cranston Company estimates the following overhead costs for the coming year:
Equipment depreciation $160,000
Equipment maintenance 60,000
Supervisory salaries 40,000
Factory rent ​ 100,000
Total $360,000
​
Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for the coming year.
(a)Calculate the predetermined overhead rate using direct labor costs as the allocation base.
(b)Calculate the predetermined overhead rate using machine hours as the allocation base.

Cranston Company Estimates the Following Overhead Costs for the Coming