Computation of Overhead rate

e14A. The overhead costs that Sife Industries, Inc., used to compute its overhead rate for the past year are as follows.

 

Indirect materials and supplies, repair and maintenance,

 

 

outside service contracts, indirect labor, factory supervision, factory insurance, heat, light, and power costs	  $222,000
Property taxes and miscellaneous overhead costs	13,000
Depreciation, machinery	85,000
Total overhead costs	$320,000

The allocation base for the past year was 40,000 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 10,000 hours.

1.    Compute the past year’s overhead rate.

2.    Compute the overhead rate for next year.