Calculating Predetermined Overhead Rates
Willard Company applies manufacturing overhead costs to products as a percentage of direct labor dollars. Estimated and actual values of manufacturing overhead and direct labor costs are summarized here:
| Estimated | Actual |
Direct labor cost | $400,000 | $350,000 |
Manufacturing overhead | 800,000 | 725,000 |
1.Compute the predetermined overhead rate.
2.Interpret this rate and explain how it will be used to apply manufacturing overhead to jobs.
3.Explain whether you used estimated or actual values to compute the rate, and why.
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