Carey Company applies manufacturing overhead costs to products as a percentage of direct labor

Carey Company applies manufacturing overhead costs to products as a percentage of direct labor dollars. Estimated and actual values of manufacturing overhead and direct labor costs are summarized here

Estimated actual

Direct labor cost $600,000 $550,000

Manufacturing overhead 900,000 850,000

1. Compute the predetermined overhead rate.

2. Interpret this rate and explain how it will be used to apply manufacturing overhead to jobs.

3. Explain whether you used estimated or actual values to compute the rate, and why.