Computation of Overhead Rate
The overhead costs that Lucca Industries, Inc., used to compute its overhead rate for the past year are as follows:
| Indirect materials and supplies | $ 79,200 |
| Repairs and maintenance | 14,900 |
| Outside service contracts | 17,300 |
| Indirect labor | 79,100 |
| Factory supervision | 42,900 |
| Depreciation–machinery | 85,000 |
| Factory insurance | 8,200 |
| Property taxes | 6,500 |
| Heat, light, and power | 7,700 |
| Miscellaneous overhead | 5,760 |
| Total overhead costs | $346,560 |
The allocation base for the past year was 45,600 total machine hours. For the next year, all overhead costs except depreciation, property taxes, and miscellaneous overhead are expected to increase by 10 percent. Depreciation should increase by 12 percent, and property taxes and miscellaneous overhead are expected to increase by 20 percent. Plant capacity in terms of machine hours used will increase by 4,400 hours.
1. Compute the past year’s overhead rate. (Carry your answer to three decimal places.)
2. Compute the overhead rate for next year. (Carry your answer to three decimal places.)
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