The Management Accountant at Morrison, Inc Required:
1) Compute the Predetermined Overhead Rate for This Company

question 143

Essay

The management accountant at Morrison, Inc. provided the following estimated costs for producing 2,500 units of a specialty product manufactured by the firm:
The company believes that direct labor hours are the most appropriate cost driver for assigning overhead costs to its product. $$\begin{array} { | l | r | } \hline \text { Direct Materials } & \$ 10,000 \\\hline \text { Direct Labor (1 hour per unit) } & 5,000 \\\hline \text { Unit-level support costs } & 10,000 \\\hline \text { Batch level support costs } & 5,000 \\\hline \text { Product-level support costs } & 3,000 \\\hline \text { Faclity-level support costs } & 7,000 \\\hline\end{array}$$ Required:
1) Compute the predetermined overhead rate for this company.2) Compute the specialty product's total estimated cost per unit.3) Why do firms assign overhead costs using a predetermined overhead rate instead of assigning actual costs?