Question

Lefave, Inc., manufactures and sells two products: Product Q1 and Product D5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours
Product Q1 2,100 6.1 12,810
Product D5 950 3.1 2,945
Total direct labor-hours 15,755

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Expected Activity
Activity Cost Pools Activity Measures Estimated Overhead Cost Product Q1 Product D5 Total

Labor-related DLHs $172,482 21,000 5600 26,600
Product testing tests 68,909 1400? 1300 2700
General factory MHs 224,825 5800 5700 11,500
$466,216

If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to:__________

Answer 1

Answer:

Predetermined manufacturing overhead rate= $29.59 per direct labor hour

Explanation:

Giving the following information:

Total direct labor-hours 15,755

Total overhead:

Labor-related DLHs= $172,482

Product testing tests= $68,909

General factory MHs= $224,825

Total= $466,216

To calculate the predetermined manufacturing 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= 466,216/15,755

Predetermined manufacturing overhead rate= $29.59 per direct labor hour