Memphis Corporation uses a job order costing system. Thus, management must establish a predetermined overhead rate for applying manufacturing overhead. During the past three years, the following data have been accumulated

\begin{tabular}{lrrrr}

\hline & 1998 & 1999 & 2000 \\

\hline Direct labor hours $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$ & 40,000 & 52,000 & 65,000 \\

Machine hours $\ldots \ldots \ldots \ldots \ldots \ldots \ldots$ & 80,000 & 65,000 & 45,000 \\

Direct materials costs . . . . . . . . . . . . . & $\$ 400,000$ & $\$ 250,000$ & $\$ 390,000$ \\

Total budgeted manufacturing overhead. . . & $\$ 80,000$ & $\$ 65,000$ & $\$ 45,000$ \\

\hline

\end{tabular}

1. What would the predetermined overhead rate be for each of the three years, if based on:

(a) direct labor hours,

(b) machine hours,

(c) direct materials costs?

2. Interpretive Question: Which allocation basis would you recommend be used in the future for applying manufacturing overhead? Why?