$7\mathrm{.}4$ What does the cost allocation base mean? What is a suitable cost allocation base for assigning IT costs to the various departments within a university?

E$7\mathrm{.}21$ Predetermined overhead rates for various cost drivers: manufacturer

The following data relate to Reeve Ltd for the year just ended:

Required

Calculate the firm's predetermined and actual overhead rates for the year using each of the

following cost drivers:

$($a$)$ machine hours

$($b$)$ direct labour hours

$($c$)$ direct labour cost.

Would you recommend using an actual overhead rate or a predetermined overhead rate for

Reeve Ltd$?$ Explain your answer.