Answer:
The correct Answer is predetermined overhead rate = $2.50 per direct labor hour.
Explanation:
Overhead is those costs required to run a business, but which cannot be directly attributed to any specific, for example, rent, factory overheads, depreciation, indirect labor and production supervisor's salary.
Total manufacturing overheads = Rent of factory building + Depreciation on factory equipment + Indirect labor + Production supervisor's salary
Total manufacturing overheads = $15,000 + $8,000 + $12,000 + $15,000
Total manufacturing overheads = $50,000
Total Direct labor hours in the year = 20,000
Predetermined Overhead Rate per labor hour = $50,000/20,000
Predetermined Overhead Rate per labor hour = $2.50 per direct labor hour
<u>
</u><u>Note:</u>
Sales salary is a selling expense and not a product cost hence it will not be included for calculating predetermined overhead rate.
Direct material and labor are direct expenses, they are product cost but not a part of Overhead cost.
