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Calculation of the manufacturing overhead rate based on labor hours and machine hours (two separate computations).
Manufacturing overhead rate based on labor hours
Total number of labor hours = 5+25 = 30
Number of hours on Millennium Surf Kit = 5
Manufacturing overhead rate to allocating manufacturing costs to Millennium Surf Kits = 5/30 = 1/6
Number of hours on Professional board = 25
Manufacturing overhead rate to allocating manufacturing costs to professional board = 25/30 = 5/6
Manufacturing overhead rate based on machine hours
Total number of machine hours = 7,500+4,000 = 11,500
Number of hours on Millennium Surf Kit = 7,500
Manufacturing overhead rate to allocating manufacturing costs to Millennium Surf Kits = 7,500/11,500
Number of hours on Professional board = 4,000
Manufacturing overhead rate to allocating manufacturing costs to professional board = 4,000/11,500
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