Reference no: EM132751785

Indigo Company produces one product, a putter called GO-Putter. Indigo uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 135,000 units per year. The total budgeted overhead at normal capacity is $742,500 comprised of $270,000 of variable costs and $472,500 of fixed costs. Indigo applies overhead on the basis of direct labor hours.

• During the current year, Indigo produced 83,200 putters, worked 84,500 direct labor hours, and incurred variable overhead costs of $91,520 and fixed overhead costs of $397,600.

Problem 1: Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.