Venkat and Company manufactures rotators for automobile engines: R1 and R2. Based on a plantwide overhead rate, the cost estimates for two of the firm€™s models for the current year are as follows:

Each rotator model requires 12 hours of direct labor. R1 requires 9 hours in department A and 3 hours in department B. R2 requires 5 hours in department A and 7 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 30,000 direct-labor hours in each Production Department during the current year.

Required:
a. Verify the firm€™s overhead rate of $18.75 per hour.
b. Suppose the company were to use departmental predetermined overhead rates with direct labor hours (DLH) as the cost driver for each department.
c. Compute the product cost of one unit of model R1 andR2.

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Department A Department B Variable cost Fixed cost $20 per direct labor hour $115,000 $6 per direct labor hour $230,000 RI R2 Direct material Direct labor $200 $300 $160 $160 Manufacturing overhead 225 $225 $585 $685 Total