Question

Longobardi 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 Corporation estimated the labor-hours for the upcoming year at 35,600 labor-hours. The estimated variable manufacturing overhead was $6.76 per labor-hour and the estimated total fixed manufacturing overhead was $906,732. The actual labor-hours for the year turned out to be 32,000 labor-hours. The predetermined overhead rate for the recently completed year was closest to:

Answer 1

Answer: $32.23 per labor-hour

Explanation:

To solve the question, we need to first calculate the estimated total manufacturing overhead which will be:

= $906,732 + ($6.76 per labor-hour × 35,600 labor-hours)

= $906732 + $240656

= $1,147,388

Predetermined overhead rate will then be:

= $1,147,388 / 35,600 labor-hours

= $32.23 per labor hour