Question

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of
$322,500; materials of $405,000 and direct labor of $215,000. During the year Adams incurred $413,000 in materials costs, $414,800 in overhead costs and
$219,000 in direct labor costs. Compute the predetermined overhead rate.

Answer 1

Answer:

150%

Explanation:

Computation of the predetermined overhead rate

Using this formula

Predetermined overhead rate=Estimated overhead/Estimated direct labor cost

Let plug in the formula

Predetermined overhead rate=$322,500/ $215,000

Predetermined overhead rate=1.5*100

Predetermined overhead rate=150%

Therefore Predetermined overhead rate will be 150%