Question

Snape 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 total fixed manufacturing overhead cost of $497,000, variable manufacturing overhead of $2.40 per direct labor-hour, and 70,000 direct labor-hours. The company recently completed Job M800 which required 150 direct labor-hours. The predetermined overhead rate is closest to: a. $7.10 per direct labor-hour b. $11.90 per direct labor-hour c. $2.40 per direct labor-hour d. $9.50 per direct labor-hour

Answer 1

Answer:

Estimated manufacturing overhead rate= $9.5 per direct labor hour

Explanation:

Giving the following information:

The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $497,000, variable manufacturing overhead of $2.40 per direct labor-hour, and 70,000 direct labor-hours.

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= (497,000/70,000) + 2.4

Estimated manufacturing overhead rate= $9.5 per direct labor hour