Alpha Company uses a normal costing system and applies overhead to jobs based on direct
labor hours. It is estimated that 160,000 direct labor hours and 110,000 machine hours will
be required to support the planned production for the year. It is also estimated that $200,000
of total fixed overhead cost and $2.75 of variable overhead per direct labor-hour will be
required for the year.
a. What allocation base does Alpha Company use?
b. What is the total annual estimated manufacturing cost for Alpha Company?
c. Calculate the predetermined overhead rate for Alpha Company.
Assume Alpha Company uses a factory wide Pre determined Overhead
d. If the estimated variable overhead per direct labor hour changes to $1.50,
what is the revised predetermined overhead rate for Alpha Company?