### Overhead Calculation GuideThis section explains how to compute the predetermined variable overhead rate and the predetermined fixed overhead rate for Stevens Door Mat company. Here are the steps and details involved:#### Background Information:- **Standard Cost System**: Stevens uses this to estimate costs.- **Labor Time**: Estimated at one hour of direct labor per door mat.#### Production Capacity:- **Normal Production Capacity**: 125,000 units per year.#### Budgeted Overhead at Normal Capacity:- **Total Budgeted Overhead**: $1,062,500 - **Variable Costs**: $437,500 - **Fixed Costs**: $625,000#### Allocation Basis:- **Overhead Allocation**: Based on direct labor hours.#### Current Year Data:- **Production**: 73,100 door mats- **Direct Labor Hours Worked**: 86,700 hours- **Variable Overhead Costs Incurred**: $186,405- **Fixed Overhead Costs Incurred**: $562,350#### Computation:1. **Predetermined Variable Overhead Rate**: \[ \text{Variable Overhead Rate} = \frac{\text{Total Variable Overhead at Normal Capacity}}{\text{Total Direct Labor Hours at Normal Capacity}} \]\[ \text{Variable Overhead Rate} = \frac{437,500}{125,000} = \$3.50 \text{ per direct labor hour} \]2. **Predetermined Fixed Overhead Rate**: \[ \text{Fixed Overhead Rate} = \frac{\text{Total Fixed Overhead at Normal Capacity}}{\text{Normal Production Capacity}} \]\[ \text{Fixed Overhead Rate} = \frac{625,000}{125,000} = \$5.00 \text{ per direct labor hour} \]#### Summary:- **Predetermined Variable Overhead Rate**: $3.50 per direct labor hour- **Predetermined Fixed Overhead Rate**: $5.00 per direct labor hour

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Description: ### Overhead Calculation GuideThis section explains how to compute the predetermined variable overhead rate and the predetermined fixed overhead rate for Stevens Door Mat company. Here are the steps and details involved:#### Background Information:-

Budgeted direct labor hours : =125,000 * 1 =125,000 hours Budgeted variable overhead given =437,500…

Business

Accounting

Compute the predetermined variable overhead rate and the predetermined fixed overhead rate Stevens door mat. Stevens uses a standard cost system and determines that it should take one hour of direct labor to produce one door mat. The normal production capacity for this mat is 125,000 units per year. The total budgeted overhead at normal capacity is 1,062,500 comprised of 437,500 of variable costs and 625,000 of fixed costs. It applies overhead on the basis of direct labor hours. During the current year, produced 73,100 mats, worked 86,700 direct labor hours, and incurred variable overhead costs of 186,405 and fixed overhead costs of 562,350.

Compute the predetermined variable overhead rate and the predetermined fixed overhead rate Stevens door mat. Stevens uses a standard cost system and determines that it should take one hour of direct labor to produce one door mat. The normal production capacity for this mat is 125,000 units per year. The total budgeted overhead at normal capacity is 1,062,500 comprised of 437,500 of variable costs and 625,000 of fixed costs. It applies overhead on the basis of direct labor hours. During the current year, produced 73,100 mats, worked 86,700 direct labor hours, and incurred variable overhead costs of 186,405 and fixed overhead costs of 562,350.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Using the most appropriate overhead application based, the appliead factory overhead for the year is _________________
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