Question

In December 2016, Infodeo established its predetermined overhead rate for movies produced during 2017 by using the following cost predictions: overhead costs, $1,584,000,and direct labor costs, $440,000. At year-end 2017, the company’s records show that actual overhead costs for the year are $1,233,900. Actual direct labor cost had been assigned to jobs as follows. Movies completed and released $ 300,000 Movies still in production 46,000 Total actual direct labor cost $ 346,000 1. Determine the predetermined overhead rate for 2017. 2

Answer 1

Answer:

$3.6

Explanation:

The computation of the predetermined overhead rate is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated direct labor costs)

= $1,584,000 ÷ $440,000

= $3.6

It shows a relationship between the estimated manufacturing overhead cost and the estimated direct labor cost so that the correct overhead rate can be computed