Description of predetermined overhead rate

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Reference no: EM13115825

Showers Company estimates the following overhead costs for the coming year:

Equipment depreciation $150,000

Equipment maintenance 50,000

Supervisory salaries 20,000

Factory rent 200,000

Total $420,000

Showers is also budgeting $600,000 in direct labor costs and 14,000 machine hours for the coming year.

a. Calculate the predetermined overhead rate using direct labor costs as the allocation base.

b. Calculate the predetermined overhead rate using machine hours as the allocation base.

c. Which of the allocation bases is preferred? Why?

Reference no: EM13115825

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