Tornado Company manufactures two types of vacuum cleaners€”Ultimate and Deluxe. Using a plantwide manufacturing overhead rate, the firm€™s controller calculated the following cost estimates:

The following information about manufacturing overhead is available:

a. Show how the company€™s predetermined overhead rate was determined.
b. Calculate overhead rates if the company were to use departmental predetermined overhead rates with direct labor hours as the cost driver for each department.
c. Compute the product cost for a unit of eachmodel.

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Deluxe $85.00 $60.00 37.50 37.50 5700 $57.00 $179.50 154.50 Ultimate Direct material Direct labor (1.5 hours at $25.00 per hour Manufacturing overhead* Total * The predetermined overhead rate is $38.00 per directlabor hour aDepartment Assembly Departmeni Budgeted variable overhead Budgeted fixed overhead Budgeted direct labor hours Direct labor Ultimate Deluxe S1 per direct-labor hour $5 per direct-labor hour $400,000 $630,000 20,000 hours 10,000 hours 0.8 hour 0.6 hour 0.7 hour 0.9 hour