EXERCISE 3-12 (30 MINUTES) NOTE TO THE INSTRUCTOR

200,000 units

The predetermined overhead rate could also be set on the basis of ei-

ther direct labor cost or direct materials cost. The computations are:

Estimated total manufacturing overhead cost

Predetermined = overhead rate Estimated total amount of the allocation base

$960,000 300% of direct

= $320,000 direct labor cost = labor cost.

$960,000 160% of direct

= $600,000 direct materials cost = materials cost.

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Solutions Manual, Chapter 3 81