Question

Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 34,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $543,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $678,635 and its actual total direct labor was 34,500 hours. Required: Compute the company’s plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Answer 1

Overhead rate= 17.97

Step-by-step explanation:

Giving the following information:

It estimated that 34,000 direct labor-hours would be required for the period’s estimated level of production.

The company also estimated:

Fixed manufacturing cost= $543,000

Variable manufacturing cost= $2.00 per direct labor-hour.

Harris’s actual manufacturing overhead cost:

Total= $678,635

Actual total direct labor was 34,500 hours.

Overhead rate: Estimated total overhead cost/Estimated total amount of the allocation base

Overhead rate= (543000+2*34000)/340000

Overhead rate= 17.97