Cranston Company Estimates the Following Overhead Costs for the Coming

question 130

Essay

Cranston Company estimates the following overhead costs for the coming year:
Equipment depreciation $160,000
Equipment maintenance 60,000
Supervisory salaries 40,000
Factory rent 100,000
Total $360,000
Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for the coming year.
Required:
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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