Infotrac Inc. sells a high-speed retrieval system for information. It provides the following information for the year.
........................................Budgeted.............. Actual
Overhead cost .......................$500,000 ...........$450,000
Machine hours .........................50,000 ..............40,000
Direct labour hours ..................100,000............. 90,000
Overhead is applied on the basis of machine hours.
(a) Calculate 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 calculating a predetermined overhead rate.