(Predetermined OH rates; capacity measures) Stir’em makes blenders and uses a normal cost system that applies overhead based on machine hours. The following 2007 budgeted data are available:

Practical capacity is 180,000 machine hours; expected capacity is two-thirds of practical.

a. What is Stir’em’s predetermined variable overhead rate?

b. What is the predetermined fixed overhead rate using practical capacity?
C. What is the predetermined fixed overhead rate using expected capacity?

d. During 2007, the firm incurs 115,000 machine hours and $900,000 of overhead costs. How much variable overhead is applied? How much fixed overhead is applied using the rate found in part (b)? How much fixed overhead is applied using the rate found in part (c)? Calculate the total under- or overapplied overhead for 2007 using both fixed overhead rates.LO1.

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Variable factory overhead at 100,000 machine hours Variable factory overhead at 150,000 machine hours Fixed factory overhead at all levels between 10,000 and 180,000 machine hours $435,000 652,500 405,000