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Compute the predetermined overhead rate assuming that Tiger Furnishings uses direct labor costs to allocate overhead costs.

Compute the predetermined overhead rate assuming that Tiger Furnishings uses direct labor costs to allocate overhead costs.

FINANCIAL ACCOUNTING
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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Compute the predetermined overhead rate assuming that Tiger Furnishings uses direct labor costs to allocate overhead costs. 

**Tiger Furnishings: Production and Cost Analysis for March** Tiger Furnishings produces two models of cabinets for home theater components: the Basic and the Dominator. Below is the data on operations and costs for March. | | Basic | Dominator | Total | |--------------------|-------|-----------|--------| | Units produced | 1,000 | 250 | 1,250 | | Machine-hours | 4,500 | 2,500 | 7,000 | | Direct labor-hours | 3,000 | 2,000 | 5,000 | | Direct materials costs | $10,000 | $3,750 | $13,750 | | Direct labor costs | $64,500 | $35,500 | $100,000 | | Manufacturing overhead costs | | | $175,000 | | Total costs | | | $288,750 | **Required Task:** Compute the predetermined overhead rate assuming that Tiger Furnishings uses direct labor costs to allocate overhead costs. - **Predetermined overhead rate = % of direct labor cost** **Notes:** The predetermined overhead rate helps in apportioning the manufacturing overhead costs based on the direct labor costs. This method is useful for budgeting and controlling production costs.
Transcribed Image Text:**Tiger Furnishings: Production and Cost Analysis for March** Tiger Furnishings produces two models of cabinets for home theater components: the Basic and the Dominator. Below is the data on operations and costs for March. | | Basic | Dominator | Total | |--------------------|-------|-----------|--------| | Units produced | 1,000 | 250 | 1,250 | | Machine-hours | 4,500 | 2,500 | 7,000 | | Direct labor-hours | 3,000 | 2,000 | 5,000 | | Direct materials costs | $10,000 | $3,750 | $13,750 | | Direct labor costs | $64,500 | $35,500 | $100,000 | | Manufacturing overhead costs | | | $175,000 | | Total costs | | | $288,750 | **Required Task:** Compute the predetermined overhead rate assuming that Tiger Furnishings uses direct labor costs to allocate overhead costs. - **Predetermined overhead rate = % of direct labor cost** **Notes:** The predetermined overhead rate helps in apportioning the manufacturing overhead costs based on the direct labor costs. This method is useful for budgeting and controlling production costs.
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