East Lake Corporation uses a job order costing system and applies manufacturing overhead using a predetermined overhead rate. The following data are available.

1. Compute the predetermined overhead rate for each of the two years, based on
(a) Direct labor hours,
(b) Direct materials costs, and
(c) Machine hours.
2. Interpretive Question: Which allocation basis would you recommend for applying manufacturing overhead?Why?

Transcribed Image Text:

2010 2011 125,000 150,000 Direct labor hours Direct materials Machine hours costs $400,000 $830,000 80,000 $100,000 Total budgeted manufacturing overhead $80,000