The Management Accountant at Morrison,Inc The Company Believes That Direct Labor Hours Are the Most

Essay

The management accountant at Morrison,Inc.provided the following estimated costs for producing 2,500 units of a specialty product manufactured by the firm: $\begin{array}{|l|r|}\hline \text { Direct Materials } & \$ 10,000 \\\hline \text { Direct Labor (1 hour per unit) } & 5,000 \\\hline \text { Unit-level support costs } & 10,000 \\\hline \text { Batch level support costs } & 5,000 \\\hline \text { Product-level support costs } & 3,000 \\\hline \text { Faclity-level support costs } & 7,000 \\\hline\end{array}$ The company believes that direct labor hours are the most appropriate cost driver for assigning overhead costs to its product.
Required:
1)Compute the predetermined overhead rate for this company.
2)Compute the specialty product's total estimated cost per unit.
3)Why do firms assign overhead costs using a predetermined overhead rate instead of assigning actual costs?