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Problem - Manufacturing Overhead
Pomona Pasteurizing Inc. used a predetermined overhead rate based on direct labor hours, but switched this year to one based on direct machine hours to apply manufacturing overhead to jobs. Production supervisors estimated that 16,715 direct labor hours will be worked during the year. Engineering estimated that the total machine hours for the year would be 66,860. The predetermined overhead rate will be? The company's estimated costs for the next year are:
Cost item
Amount
Depreciation of Factory Equipment
$72,000
Direct Labor
240,000
Direct Materials
36,000
Factory Equipment Lease
144,000
Factory Maintenance
180,000
Indirect labor
72,000
Sales Salaries
174,000
Total Estimated Overhead
918,000
Estimated Labor Hours
16,715
Estimated Machine Hours
66,860
At the end of the year, the actual machine hours were 67,200 and the total actual manufacturing overhead was $179,840.
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