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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. Compute the predetermined factory overhead rate using direct labor costs as the allocation base.
b. Compute the predetermined factory overhead rate using machine hours as the allocation base.
Answer
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