Abbey Products Company is studying the results of applying factory overhead to production. The following data have been used: estimated factory overhead, $60,000; estimated materials costs, $50,000; estimated direct labor costs, $60,000; estimated direct labor hours, 10,000; estimated machine hours, 20,000; work in process at the beginning of the month, none. The actual factory overhead incurred for November was $80,000, and the production statistics on November 30 are as follows:

• 1. Compute the predetermined rate, based on the following:
  • a. Direct labor cost
  • b. Direct labor hours
  • c. Machine hours
• 2. Using each of the methods, compute the estimated total cost of each job at the end of the month.
• 3. Determine the under- or overapplied factory overhead, in total, at the end of the month under each of the methods.
• 4. Which method would you recommend? Why?