The company computes its predetermined overhead rate annually on the basis of di
ID: 2391423 • Letter: T
Question
The company computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 37,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $539,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. The company's actual manufacturing overhead for the year was $724,409 and its actual total direct labor was 37,500 hours.
Compute the company's predetermined overhead rate for the year.
The company computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 37,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $539,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. The company's actual manufacturing overhead for the year was $724,409 and its actual total direct labor was 37,500 hours.
Compute the company's predetermined overhead rate for the year.
Explanation / Answer
predetermined overhead rate = total overhead (fixed + varaiable)/estimated labour hours ( 539000 + (37000*3))/37000 = 17.57 /direct labour hour