Question

Dallas Company uses a job order costing system. The company's executives estimated that direct labor would be $2,990,000 (230,000 hours at $13/hour) and that factory overhead would be $1,530,000 for the current period. At the end of the period, the records show that there had been 210,000 hours of direct labor and $1,230,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead rate

Answer 1

Answer:

Predetermined manufacturing overhead rate= $6.65 per direct labor hour

Explanation:

Giving the following information:

The company's executives estimated that direct labor would be $2,990,000 (230,000 hours at $13/hour) and that factory overhead would be $1,530,000 for the current period.

To calculate the predetermined overhead rate, we need to use the following formula:

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

Predetermined manufacturing overhead rate= 1,530,000/230,000

Predetermined manufacturing overhead rate= $6.65 per direct labor hour