Reference no: EM132986956

Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $118,300 of manufacturing overhead for an estimated allocation base of $91,000 direct material dollars to be used in production.

The company has provided the following data for the just completed year:

Purchase of raw materials $138,000

Direct labor cost $87,000

Manufacturing overhead costs:

Indirect labor $112,900

Property taxes $8,700

Depreciation of equipment $17,000

Maintenance $13,000

Insurance $10,700

Rent, building $32,000

                                   Beginning                 Ending

Raw Materials           $24,000               $15,000

Work in Process         $44,000              $37,000

Finished Goods           $72,000                $57,000

Problem 1: Determine the predetermined overhead rate for the year.