1. The total overhead cost at the denominator level of activity must be de-
termined before the predetermined overhead rate can be computed.
Total fixed overhead cost per year ... $250,000
Total variable overhead cost
($2 per DLH × 40,000 DLHs)... 80,000
Total overhead cost at the denominator level of activity.... $330,000
Overhead at the denominator level of activity
Predetermined= overhead rate Denominator level of activity
$330,000
= =$8.25 per DLH
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