Question

Branin 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 $160,000, variable manufacturing overhead of $3.40 per direct labor- hour, and 80,000 direct labor-hours. The company has provided the following data concerning Job A578 which was recently completed: total labor hours: 250. Direct materials: $715. Direct labor cost: $9000.
The predetermined overhead rate is closest to:
a. $8.80 per direct labor-hour
b. $2.00 per direct labor-hour
c. $3.40 per direct labor-hour
d. $5.40 per direct labor-hour

Answer 1

Answer:

Predetermined overhead rate based on direct labor-hours is $5.4

Explanation:

To  calculate predetermined overhead rate based on direct labor-hours the first thing we have to do is to divide fixed manufacturing overhead cost over the estimated labor hours ($160,000/80,000 hours), then we have to add the variable manufacturing overhead in this case $3.40 per hour

So predetermined overhead rate is (160,000/80,000)+3.4=$5.4 per direct labor-hour

Answer 2

Answer:

d. $5.40 per direct labor-hour

Explanation:

The predetermined overhead rate = (total fixed manufacturing overhead cost + total  variable manufacturing overhead ) / Total Direct Labor Hours

= [$ 160,000 + ( $3.40 per direct labor- hour * 80,000 direct labor-hours)] / 80,000 direct labor Hour

= [$ 160,000 + $ 272,000 ] /80,000 direct labor Hour

= $ 432,000/ 80000 direct labor Hour

= $ 5.40 per direct labor Hour