Pools manufactures swimming pool equipment. Dimmell estimates total manufacturing overhead costs next year to be

# Pools manufactures swimming pool equipment. Dimmell estimates total manufacturing overhead costs next year to be

365.9k points

Pools manufactures swimming pool equipment. Dimmell estimates total manufacturing overhead costs next year to be \$1,525,000. Dimmell also estimates it will use 61,000 direct labor hours and incur \$1,220,000 of direct labor cost next year. In​ addition, the machines are expected to be run for 38,125 hours.

Compute the predetermined manufacturing overhead rate for next year under the following independent​ situations:

1. Assume that the company uses direct labor hours as its manufacturing overhead allocation base.

2. Assume that the company uses direct labor cost as its manufacturing overhead allocation base.

3. Assume that the company uses machine hours as its manufacturing overhead allocation base.

Pools manufactures
JasonJones

365.9k points

1. Compute the predetermined manufacturing overhead rate for next year assuming that the company uses direct labor hours as its manufacturing overhead allocation base.

Identify the formula and compute the predetermined manufacturing overhead rate for next year using direct labor hours as the manufacturing overhead allocation base.

Estimated manufacturing overhead costs / Estimated direct labor hours = Predetermined manufacturing overhead rate

1,525,000 / 61,000 = \$25 per DL hour 2. Compute the predetermined manufacturing overhead rate for next year assuming that the company uses direct labor cost as its manufacturing overhead allocation base. Identify the formula and compute the predetermined manufacturing overhead rate for next year using direct labor cost as the manufacturing overhead allocation base. ​(Enter the rate as a whole​ percent.) Estimated manufacturing overhead costs / Estimated direct labor cost = Predetermined manufacturing overhead rate 1,525,000 / 1,220,000 = 125% of DL cost 3. Compute the predetermined manufacturing overhead rate for next year assuming that the company uses machine hours as its manufacturing overhead allocation base. Identify the formula and compute the predetermined manufacturing overhead rate for next year using machine hours as the manufacturing overhead allocation base. Estimated manufacturing overhead costs / Estimated machine hours = Predetermined manufacturing overhead rate 1,525,000 / 38,125 = \$40

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