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Reamer Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year:
Direct Materials......... $1,000Direct labor........... 3,000Sales Commissions......... 4,000Salary of ProductionSupervisor....................2,000Indirect Materials.............400Advertising Expense..........800Rent of Factory Equipment 1,000
Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:
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