On January 1, a bank estimated its production capacity to be 800 million units and used that estimate to compute its predetermined overhead rate of $0.01 per transaction (one unit ¼ one transaction). The units produced for the four quarters follow:
Quarter Actual Units of Production (in millions)
1st................................................................ 200 Transactions
2nd............................................................... 200 Transactions
3rd................................................................ 200 Transactions
4th................................................................ 100 Transactions
a. Compute the amount of total overhead applied under normal costing for each quarter.
b. What was the estimated overhead for the year for the predicted capacity of 800 million units?