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Problem 3-55 Predetermined Overhead Troy Electronics Company calculates its predetermined overhead rate on a quarterly basis. The follow- Rate; Different Time Periods; ing estimates were made for the current year. (LO 3-4) 4. Predetermined rate: $4.44 per hour (rounded) The firm's main product, part number A200, requires $100 of direct material and 20 hours of direct labor per unit. The labor rate is $15 per hour. Required: 1. Calculate the firm's quarterly predetermined overhead rate for each quarter. 2. Determine the cost of one unit of part number A200 if it is manufactured in January versus April. 3. Suppose the company's pricing policy calls for a 10 percent markup over cost. Calculate the price to be charged for a unit of part number A200 if it is produced in January versus April. 4. Calculate the company's predetermined overhead rate for the year if the rate is calculated annually. 5. Based on your answer to requirement 4 , what is the cost of a unit of part number A200 if it is manufactured in January? In April? 6. What is the price of a unit of part A200 if the predetermined overhead rate is calculated annually? Each model of printer requires 20 hours of direct labor. The basic system requires 5 hours in department A and 15 hours in department B. The advanced system requires 15 hours in department A and 5 hours in department B. The overhead costs budgeted in these two production departments are as follows: The firm's management expects to operate at a level of 20,000 direct-labor hours in each production department during the current year. (This estimate is based on the practical capacity of each department.) Required: 1. Show how the company's predetermined overhead rate was determined. 2. If the firm prices each model of color printer at 10 percent over its cost, what will be the price of each model? 3. Suppose the company were to use departmental predetermined overhead rates. Calculate the rate for each of the two production departments. 4. Compute the product cost of each model using the departmental overhead rates calculated in requirement 3. 5. Compute the price to be charged for each model, assuming the company continues to price each product at 10 percent above cost. Use the revised product costs calculated in requirement 4. 6. Write a memo to the president of TeleTech Corporation making a recommendation as to whether the firm should use a plantwide overhead rate or departmental rates. Consider the potential implications of the overhead rates and the firm's pricing policy. How might these considerations affect the firm's ability to compete in the marketplace