Greetings

1. Predetermined overhead is a method of applying overhead to the products under job order costing system. In this method we estimate the overhead and estimate a base and calculate the predetermined rate as Estimated overhead/estimated base.
Based on the usage of base, the overhead is applied to products.
2. The advantage is simplicity, the cost of each print is know and so overhead can easily be applied. The disadvantage is that the cost of print may not be a correct cost driver. As we have seen, unframed prints do not need much overhead while framed prints need more work to done and so using the print cost as cost driver may not allocated overhead costs correctly.
3. Predetermined overhead rate = Estimated Overhead/Estimated total cost of prints The estimated overhead is $375,200 The total cost of print = Number of units to be sold X cost of print The cost of prints is 80,000X12 + 15,000X16 + 7,000X20 = $1,340,000 Predetermined overhead rate is 375,200/1,340,000 = $0.28/$ of print cost
This means that for each $ of print cost, $0.28 of overhead would be applied to the product.
4.
(a) Lance Armstrong unframed print (base cost of print $12). Print Cost 12
Direct Labor ($0.2X10 minutes) 2
Overhead (0.28X12) 3.36
Total cost $17.36
(b) John Elway print in steel frame, no mat (base cost of print $16). Print Cost 16
Frame and Glass 4
Direct Labor ($0.2X10+0.35X20) 9
Overhead (0.28 X 16) 4.48
Total cost $33.48 (c) Lambeau Field print in wood frame with mat (base cost of print $20). Print Cost 20
Frame and Glass 6
Matting 4
Direct Labor ($0.2X10+$0.35X30) 12.50
Overhead ($0.28X20) 5.60
Total cost $48.10
5. (a) Overhead allocated to unframed prints = 0.28 X 80,000 X12 = 268,800
(b) Overhead allocated to steel framed prints = 0.28 X 15,000 X 16 = 67,200
(c) Overhead allocated to wood framed prints = 0.28 X 7,000 X 20 =