Bigg Production Company could set its predetermined overhead rate based on the year’s expected factory overhead cost and either the year’s expected direct labor hours or direct labor cost (dollars). Bigg expects this year’s factory overhead costs to be

$126,000. It also expects that its employees will work 12,000 direct labor hours this year and that this labor will cost $120,000.

Required: (1) What is Bigg’s predetermined overhead rate per direct labor hour?

(2) What is Bigg’s predetermined overhead rate per direct labor dollar?

(3) Refer to 16-20. How much total overhead would Bigg apply to the job orders in May if it used the predetermined overhead rate per direct labor hour? Use T-accounts to show how applying the overhead would affect Bigg’s accounts.

(4) Refer again to 16-20. How much total overhead would Bigg apply to the job orders in May if it used the predetermined overhead rate per direct labor dollar? TLK=2