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Wanda Instrumentation produces navigational equipment for ships, aircraft $($both staffed and drones$),$ and land vehicles. The parts are produced to specification by their customers. Depending on the customer and the type of job, the customer pays according to the terms of either a "fixed$-$price" contract $($the price does not depend directly on the cost of the job$)$ or of a "cost$-$plus" contract $($the price is equal to recorded cost plus a fixed fee$).$ Wanda expects only two clients $($Ivanhoe Aviation and Rolf's Shipyard$)$ in Year $2.$ The work done for Ivanhoe will all be done under cost$-$plus contracts while the work done for Rolf's will all be done under fixed$-$price contracts.

The controller at Wanda Instrumentation chose direct materials cost as the allocation base in Year $2,$ based on what the financial staff thought reflected the relation between overhead and direct labor cost. Year $3$ is approaching and again the company only expects two clients: Rolf's Shipyard and Emily's Trucking Lines $($ETL$).$ Work for Rolf's Shipyard will continue to be billed using fixed$-$price contracts, and ETL will be billed based on cost$-$plus contracts.

Selected budget data for Year $3$ include the following:

Rolf's Shipyard ETL Unassigned

Direct labor cost $($$$000)$ $ $1,500$ $ $2,500$

Direct materials cost $($$$000)1,7501,750$

Manufacturing overhead $($$$000)$ $ $7,000$

Required:

Compute the predetermined rate assuming that Wanda Instrumentation uses direct labor cost to apply overhead.

Compute the predetermined rate assuming that Wanda Instrumentation uses direct materials cost to apply overhead.

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