Question

Western​, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $ 640,000 of indirect costs this​ year, and she expects her firm to work 4,000 direct labor hours. Western​'s systems consultants provide direct labor at a rate of $ 280 per hour. Clients are billed at 160​% of direct labor cost. Last​ month, Western​'s consultants spent 170 hours on Halbert​'s engagement.
Compute Western's predetermined overhead allocation rate per direct labor hour.

Answer 1

Answer:

Estimated manufacturing overhead rate= $160 per direct labor hour

Explanation:

Giving the following information:

Estimated overhead= $640,000

Estimated direct labor hours= 4,000

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 640,000/4,000

Estimated manufacturing overhead rate= $160 per direct labor hour