The predetermined overhead rate is closest to: $5.40 per direct labor-hour.
<h3>Predetermined overhead rate</h3>
First step is to calculate the Estimated total manufacturing overhead cost
Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base)
Estimated total manufacturing overhead cost = $96,000 + ($3.00 per direct labor-hour × 40,000 direct labor-hours)
Estimated total manufacturing overhead cost = $96,000 + $120,000
Estimated total manufacturing overhead cost = $216,000
Second step is to calculate the Predetermined overhead rate
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base
Predetermined overhead rate= $216,000 ÷ 40,000 direct labor-hours
Predetermined overhead rate= $5.40 per direct labor-hour
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The complete question is:
Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data:
Total direct labor-hours 40,000
Total fixed manufacturing overhead cost $ 96,000
Variable manufacturing overhead per direct labor-hour $ 3.00
Recently, Job P951 was completed with the following characteristics:
Number of units in the job 20
Total direct labor-hours 100
Direct materials $ 755
Direct labor cost $ 4,000
The predetermined overhead rate is closest to:
