ANSWER

To calculate the predetermined overhead rate used to apply general operating costs to Harmon Recycling Services’ (HRS) two drop-off centers (Eastside and Westside), we need to use the staff cost as the allocation base. This rate will help distribute the general operating costs fairly between the two centers based on the proportion of staff hours each center utilizes. Let’s break down the calculation step by step.

Step 1: Calculate the Total Staff Hours To find the total staff hours for all centers, we add the staff hours at Eastside and Westside:

Total Staff Hours = Staff Hours at Eastside + Staff Hours at Westside Total Staff Hours = 9,477 + 3,159 = 12,636 hours

Step 2: Calculate the Predetermined Overhead Rate The predetermined overhead rate is calculated by dividing the total general operating costs by the total staff hours:

Predetermined Overhead Rate = Total General Operating Costs / Total Staff Hours

In this case, the total general operating costs are $315,900.

Predetermined Overhead Rate = $315,900 / 12,636 hours ≈ $25 per staff hour

Now that we have calculated the predetermined overhead rate, we can determine the expected surplus for each center based on the rates computed.

Step 3: Calculate Expected Surplus for Each Center To find the expected surplus for each center, we’ll compare their revenues to their total costs (staff costs and allocated general operating costs). We’ll use the predetermined overhead rate of $25 per staff hour to allocate general operating costs.

For Eastside: Revenues at Eastside = $315,900 Staff Costs at Eastside = $115,830

To find the allocated general operating costs at Eastside, we use the staff hours:

Allocated General Operating Costs at Eastside = Staff Hours at Eastside × Predetermined Overhead Rate Allocated General Operating Costs at Eastside = 9,477 hours × $25/hour = $236,925

Total Costs at Eastside = Staff Costs + Allocated General Operating Costs Total Costs at Eastside = $115,830 + $236,925 = $352,755

Expected Surplus at Eastside = Revenues at Eastside – Total Costs at Eastside Expected Surplus at Eastside = $315,900 – $352,755 = -$36,855

For Westside: Revenues at Westside = $210,600 Staff Costs at Westside = $94,770

Allocated General Operating Costs at Westside = Staff Hours at Westside × Predetermined Overhead Rate Allocated General Operating Costs at Westside = 3,159 hours × $25/hour = $78,975

Total Costs at Westside = Staff Costs + Allocated General Operating Costs Total Costs at Westside = $94,770 + $78,975 = $173,745

Expected Surplus at Westside = Revenues at Westside – Total Costs at Westside Expected Surplus at Westside = $210,600 – $173,745 = $36,855

In summary:

The predetermined overhead rate used to apply general operating costs is approximately $25 per staff hour.

Eastside is expected to have a deficit of approximately -$36,855.

Westside is expected to have a surplus of approximately $36,855.

These calculations provide insight into the expected financial performance of each center, which can help HRS in making informed decisions about resource allocation and cost management.