The controller for Tender Bird Poultry, Inc. estimates that the company’s fixed overhead is $l0, 0000 per year. She also has determined that the variable overhead is approximately $.10 per chicken raised and sold. Since the firm has a single product, overhead is applied on the basis of output units, chickens raised and sold.

Required:

1. Calculate the predetermined overhead rate under each of the following output predictions: 200,000 chickens, 300,000 chickens, and 400,000 chickens.

2. Does the predetermined overhead rate change in proportion to the change in predicted production? Why?