Tata Motors management is working with their production supervisor to compute
a predetermined overhead rate for the coming year to be used in the manufacture
of their upcoming car the Tata Safari. The production supervisor has put together
a budget of 1,600 direct labor hours for the coming year. During the same period,
they plan to use 2,000 machine hours. He has assembled the following information
for the upcoming year:
Direct materials $100,000
Direct labor cost $140,000
Wages of factory janitors $70,000
Sales supervisor salary $102,000
Utilities for factory $34,000
Rent on factory building $24,000
Advertising expense $10,000
If Tata Motors decides to use a predetermined overhead rate based on direct labor
hours, what would be the predetermined overhead rate?