Example (2): Assume the following information is given to you: LTotal mumber of machine hours noquired to create the productive capacity are 100,000 machine hours. 2. Each unit of the final product requires two machine hours to be produced 3. the anticipated unavoidable interruption in production (breakdown time, setup time, and maintenance time) is 10,000 machine hours. 4.The estimated sales during the following 5 years are as follows: Year Forecasted Sales in units 40,000 42,000 41,000 38,000 43,000 Required: Compute the following: a. Theoretical (ideal) capacity. b. Practical (Realistic) capacity c. Normal (Lon-Term) Capacity d. Expected (Short-Term) Capacity. Example (3) Back to example (2), assume the following information is given to you: 40.800 Units 122,400 DLH 81.600 MH 163.200 LB Normal productive capacity in units Direct labor hours (3 hours are required to produce one unit. Wage rate per hour is $2) Machine hours (2 hours per unit) Direct material used ( 4 pounds required to produce one unit. Each material pounds costs S1) F..H Variable F.. S 1 s 5 6.120 Indirect labor cost (average per hour) Indirect labor Fuel to run factory machine and equipment (5% of DLH) $40 6.120 Average per machine hour) Fixed F.O.H $80,000 $22,000 Depreciation of factory machines and equipments Required: a. Estimate factory overhead b.Compute the factory overhead application rate using: 1. Direct material cost. 2. Direct labor cost. 3. Direct labor hours. 4. Machine hours 5. Normal units produced