When sample company prepared their operating budget for 2013, they estimated that they'd have 100,000 hours of direct labor, variable overhead of $10 per hour of direct labor, and fixed overhead of $250,000. If sample company produced to full capacity, it would require 120,000 hours of direct labor.
(a.) What is sample company predetermined overhead allocation rate for 2013?
(b.) What would be sample company predetermined overhead allocation rate be if they base the fixed overhead allocation rate on the basis of their productive capacity instead of expected direct labor?
(c.) Assume that 2013 is a slow year and sample company only has 80,000 hours of direct labor. Sample company however, has $1,100,000 of total overhead. How much over- or under-allocated overhead will sample company have?
(d.) If sample company only has 80,000 hours of direct labor, and total overhead of $1,100,000, how much over- or under-allocated will sample company have if they base their predetermined overhead allocation rate on capacity instead of expected direct labor?