Warner Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year.
|
Budgeted
|
Actual
|
|
Overhead cost
|
$1,000,000
|
$950,000
|
|
Machine hours
|
50,000
|
45,000
|
|
Direct labor hours
|
100,000
|
92,000
|
Overhead is applied on the basis of direct labor hours. (a) Compute the predetermined overhead rate. (b) Determine the amount of overhead applied for the year. (c) Explain how an activity-based costing system might differ in terms of computing a predetermined overhead rate.