Question

Sunland Company manufactures a line of lightweight running shoes. CEO Mark Sunland estimated that the company would incur $3,379,520 in manufacturing overhead during the coming year. Additionally, he estimated the company would operate at a level requiring 236,000 direct labor hours and 617,828 machine hours. Assume that Sinclair Company uses direct labor hours as its manufacturing overhead application base. Calculate the company's predetermined overhead rate.

Answer 1

Answer:

Estimated manufacturing overhead rate= $14.32 per direct labor hour

Explanation:

Giving the following information:

CEO Mark Sunland estimated that the company would incur $3,379,520 in manufacturing overhead during the coming year.

Direct labor hours= 236,000

To calculate the estimated manufacturing overhead rate 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= 3,379,520/236,000= $14.32 per direct labor hour