Question

Capalbo Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 52,000 labor-hours. The estimated variable manufacturing overhead was $2.78 per labor-hour and the estimated total fixed manufacturing overhead was $1,192,360. The actual labor-hours for the year turned out to be 52,600 labor-hours. The predetermined overhead rate for the recently completed year was closest to:______.
a. $2.78
b. $25.45
c. $25.71
d. $22.93

Answer 1

Answer:

Predetermined overhead Absorption rate = $22.93. per labour hour

Explanation:

Predetermined Overhead absorption rate(POAR) = Estimate overhead /Estimated labour hours  

Estimated overhead = $1,192,360

Estimated labour hours =52,000 hours  

Overhead absorption rate = $1,192,360/52,000 hours =$22.93 per labour hour

Predetermined overhead Absorption rate = $22.93. per labour hour