Traditional costing allocates overhead costs to products based upon a predetermined factory overhead rate, which is computed using an estimated activity base such as direct labor hours or machine hours. The rate is computed as follows:

Predetermined Factory Overhead Rate = (Estimated Total Factory Overhead Costs) (Estimated Activity Base)

WoolCo has been using traditional costing with combing machine hours as the activity base. The company would like to consider activity-based costing. In order to understand their current system better, you evaluate WoolCos current method of costing for raw wool and wool yarn. The production staff has compiled the following information for you on the production of 450 pounds of either raw wool or wool yarn:

Total Factory	Total Costs
Overhead Costs
Sorting	$25,600
Cleaning	39,600
Combing	1,200

	Raw Wool	Wool Yarn
Hours of combing machine use required	70	30

In the following table, use combing machine hours as the activity base for assigning overhead costs to each product. When required, round your answers to the nearest dollar.

Predetermined factory overhead rate: per direct labor hour

Points:

0 / 1

	Raw Wool	Wool Yarn
Allocated factory overhead cost