Cranston Company Estimates the Following Overhead Costs for the Coming

question 131

Essay

Cranston Company estimates the following overhead costs for the coming year:​​ $\begin{array}{lr}\text { Equipment depreciation } & \$ 160,000 \\\text { Equipment maintenance } & 60,000 \\\text { Supervisory salaries } & 40,000 \\\text { Factory rent } & 100,000 \\\text { Total } & \mathbf{\$ 36 0 , 0 0 0} \\\end{array}$ Cranston is also budgeting $600,000 in direct labor costs and 15,000 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.

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Definitions:

Financial Loss

The negative impact experienced when expenses exceed revenues, or when assets lose value, affecting an individual's or entity's overall financial health.

Volenti Non Fit Injuria

A defence in torts based on the plaintiff’s voluntarily assuming a clear legal risk.

Physical Risk

Refers to the likelihood of bodily harm or injury in a given environment or activity.

Legal Risk

The potential for losses or damages resulting from legal proceedings, actions, or changes in law.