Computing and using overhead rates A manufacturer of small appliances estimates over- head costs of $500,000 for 1992. Three possible overhead application bases are being considered by management; they are direct labor hours, direct labor cost, and machine hours. Estimated 1992 activity levels for each of the potential application bases are given below:

A countertop oven-broiler manufactured by the company requires two direct labor hours, $18.00 of direct labor cost, and 1.2 hours of machine time. The balance in the manufacturing overhead control account was $576,000 on December 31,1992. During 1992,120,000 direct labor hours were worked at a cost of $930,000, and 90,000 machine hours were used. There were 10,000 oven-broilers manufactured in 1992 requiring 20,000 direct labor hours.

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Direct labor hours Direct labor cost... Machine hours 100,000 hours $800,000 80,000 hours