Activity. Cost pool Est. overhead cost Expected activity
Labor related $48,000 20,000 direct labor-hours
Machine related 67,500 45,000 machine-hours
Machine set-ups 84,000 600 setups
Productoin orders 112,000 400 orders
Product testing 58,500 900 tests
Packaging 90,000 6000 packages
General factory 672,000 20,000 direct labor-hours

Compute the compant's predetermined overhead rate, assuming that the company uses a single planywide predetermined overhead rate based on direct labor-hours.

It's difficult to show problems in columns in here, but I am going to set up your problem so it's easier to read and show you how to solve it.

Activity. Cost pool .............Est overhead cost.............Expected activity
Labor related.........................48,000............ ............20,000 direct labor-hrs
Machine related.....................67,500................ .........45,000 machine-hours
Machine set-ups....................84,000................ ........600 setups
Production orders.................112,000.................... .....400 orders
Product testing.....................58,500................ ..........900 tests
Packaging.............................90,000...... ....................6000 packages
General factory....................672,000................ .........20,000 direct labor-hrs

Total overhead..................1,132,000

Basicallly, what you have here is a computation of estimated overhead per item based on various units that made sense in computing that overhead item. What they want is an overhead rate that is easy to compute, so they are asking you to come up with one based on direct labor hours. If you take the total overhead divided by the direct labor hours you will get that rate. $1,132,000/20,000 direct labor hours = 56.60 This is your overhead rate. This rate would be applied to each product/project based on estimated labor hours. As you can see, it gives you a quick way to estimate total overhead for a product/project based on direct labor hours, versus doing the step by step calculation that was the basis for determining the total overhead.

Activity. Cost pool... Est overhead cost... Expected activity
Labor related... 48,000... 20,000 direct labor-hrs
Machine related... 67,500... 45,000 machine-hours
Machine set-ups... 84,000.. . 600 setups
Production orders... 112,000... 400 orders
Product testing... 58,500... 900 tests
Packaging... 90,000... 6000 packages
General factory... 672,000... 20,000 direct labor-hrs

Total overhead... 1,132,000

Basicallly, what you have here is a computation of estimated overhead per item based on various units that made sense in computing that overhead item. What they want is an overhead rate that is easy to compute, so they are asking you to come up with one based on direct labor hours. If you take the total overhead divided by the direct labor hours you will get that rate. $1,132,000/20,000 direct labor hours = 56.60 This is your overhead rate. This rate would be applied to each product/project based on estimated labor hours. As you can see, it gives you a quick way to estimate total overhead for a product/project based on direct labor hours, versus doing the step by step calculation that was the basis for determining the total overhead.

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