Question

Hyu Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 55,400 labor-hours. The estimated variable manufacturing overhead was $3.12 per labor-hour and the estimated total fixed manufacturing overhead was $1,230,440. The actual labor-hours for the year turned out to be 56,000 labor-hours. The predetermined overhead rate for the recently completed year was closest to:

Answer 1

Answer:

The predetermined overhead rate for the recently completed year was $25.33

Explanation:

The formula to compute the predetermined overhead rate is shown below:

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

where,

Total estimated manufacturing overhead = Estimated total fixed manufacturing overhead + estimated variable manufacturing overhead rate × estimated labor hours

= $1,230,440 + $3.12 × 55,400 hours

= $1,230,440 + $172,848

= $1,403,288

Now put these values to the above formula  

So, the rate would equal to

= $1,403,288 ÷ 55,400 hours

= $25.33