Question

Need help solving the 3 parts of the problem. Thanks.

Answer 1

1. Predetermined overhead rate = Estimated studio overhead cost/Estimated hours of studio service

	Last Year	This Year
Estimated studio overhead cost (a)	$       90,000	$       90,000
Estimated hours of studio service (b)	1200	950
Predetermined overhead rate (c) = (a)/(b)	$         75.00	$         94.74
Studio hours required for Verde Baja job (d)	43	43
Overhead applied to Verde Baja job (e) = (c) x (d)	$         3,225	$         4,074

2. Predetermined overhead rate = Estimated studio overhead cost/Hours of studio service at capacity

	Last Year	This Year
Estimated studio overhead cost (a)	$       90,000	$       90,000
Hours of studio service at capacity (b)	2000	2000
Predetermined overhead rate (c) = (a)/(b)	$         45.00	$         45.00
Studio hours required for Verde Baja job (d)	43	43
Overhead applied to Verde Baja job (e) = (c) x (d)	$         1,935	$         1,935

3.

	Last Year	This Year
Predetermined overhead rate (a)	$         45.00	$         45.00
Unused capacity hours (b)	900	1150
	(2000 - 1100)	(2000 - 850)
Cost of unused capacity (c) = (a) x (b)	$       40,500	$       51,750