Question

Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year it estimated that its total manufacturing overhead would be $134,000 and the total direct labor would be 20,000 hours. Its actual total manufacturing overhead for the year was $ 123,900 and its actual total direct labor was 21,000 hours.
Compute the Company's predetermined over rate for the year?

Answer 1

Answer: $6.70 per direct labor hour

Explanation:

Given that,

Estimated total manufacturing overhead = $134,000

Estimated total direct labor = 20,000 hours

Actual total manufacturing overhead for the year = $ 123,900

Actual total direct labor = 21,000 hours

Predetermined over rate for the year = $\frac{Estimated\ manufacturing\ overhead}{Estimated\ direct\ labor\ hours}$

                                                              = $\frac{134,000}{20,000}$

                                                              = $6.70 per direct labor hour