The management accountant at Melrose, Inc. provided the following estimated costs for producing 5,000 units of a specialty product manufactured by the firm:
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.