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Waldman Pools manufactures swimming pool equipment
Waldman Pools manufactures swimming pool equipment. Waldman estimates total manufacturing overhead costs next year to be $1,500,000. Waldman also estimates it will use 37,500 direct labour hours and incur $1,200,000 of direct labour cost next year. In addition, the machines are expected to be run for 30,000 hours.
Compute the predetermined manufacturing overhead rate for next year under the following independent situations:
1. Assume that Waldman uses direct labour hours as its manufacturing overhead allocation base
2. Assume that Waldman uses direct labour cost as its manufacturing overhead allocation base.
3. Assume that Waldman uses machine hours as its manufacturing allocation base.
Expert Solution
1). Predetermined overhead rate based on direct labor hours = $40 per direct labor hour
2). Predetermined overhead rate based on direct labor cost = 125% of direct labor cost
3). Predetermined overhead rate based on machine hours = $50 per machine hour
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