Question 1

Predetermined overhead rate

a. XYZ Furniture Company uses direct labor cost as the activity base. Assuming that the company expects annual overhead costs to be $280,000 and direct labor costs for the year to be $350,000, compute the overhead rate.

b. XYZ Furniture Company incurred the following costs. For each cost, mark the cost as a variable cost, a fixed cost, or a mixed cost.

	Variable Costs	Fixed Costs	Mixed Costs
Wood used in the production of furniture.
Fuel used in delivery trucks.
Straight-line depreciation on factory building.
Screws used in the production of furniture.
Sales staff salaries.
Sales commissions.
Property taxes.
Insurance on buildings.
Hourly wages of furniture craftsmen.
Salaries of factory supervisors.
Utilities expense.
Telephone bill.