Question

Dallas Company uses a job order costing system. The company's executives estimated that direct labor would be $5,130,000 (190,000 hours at $27/hour) and that factory overhead would be $1,430,000 for the current period. At the end of the period, the records show that there had been 110,000 hours of direct labor and $1,130,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead rate?a. $5.17 per direct labor hour. b. $7.00 per direct labor hour. c. $6.42 per direct labor hour. d. $5.84 per direct labor hour. e. $6.25 per direct labor hour.

Answer 1

Answer:

Estimated manufacturing overhead rate= $7.53 per direct labor hour

Explanation:

Giving the following information:

The company's executives estimated that direct labor would be $5,130,000 (190,000 hours at $27/hour) and that factory overhead would be $1,430,000 for the current period.

We need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 1,430,000/190,000= $7.53 per direct labor hour