Digger Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year.

Budgeted Actual Overhead cost $975,000 $950,000 Machine hours 50,000 45,000 Direct labor hours 100,000 92,000

(a) Compute the predetermined overhead rate.?

predetermined overhead rate = budgeted overhead / budgeted direct labor hours

= 975,000 / 100,000

= $ 9.75 per direct labor hours

(b) Determine the amount of overhead applied for the year.?

overhead applied =actual hours *overhead rate

= 92000 * 9.75

= $ 897,000

(c) Explain how an activity-based costing system might differ in terms of computing a predetermined overhead rate.