Lewis Company calculates its predetermined rates using practical volume, which i

Question

Lewis Company calculates its predetermined rates using practical volume, which is 288,000 units. The standard cost system allows 2 direct labor hours per unit produced. Overhead is applied using direct labor hours. The total budgeted overhead is $3,168,000, of which $864,000 is fixed overhead. The actual results for the year are as follows:

Units produced: 280,000
Direct labor: 570,000 hours @ $9
Variable overhead: $2,320,000
Fixed overhead: $872,000

(1-1) The predetermined fixed overhead rate is:
(1-2) The predetermined variable overhead rate is:
(1-3) Calculate the applied fixed overhead.

Explanation / Answer

1. 864,000/288,000*2= $1.50 per hour 2. 2,304,000/288,000*2= $4.00 per hour 3. 570,000* $1.50= $855,000.

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