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10. (A) Explain in detail how a single, plant-wide factory overhead allocation rate is established (i.e., what is the formula?). (B) Using the following
10. (A) Explain in detail how a single, plant-wide factory overhead allocation rate is established (i.e., what is the formula?). (B) Using the following example, calculate the pre-determined factory overhead allocation rate that was used, assuming that direct labor hours were used as the base. Pate Company uses a job order cost accounting system. The company's management estimated that direct labor (total) would be $2,000,000 (200,000 hours at $10/hour) and that total factory overhead would be $1,500,000 for the current period. At the end of the period, the records show that there actually had been 180,000 hours of direct labor and $1,200,000 of actual overhead costs.
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