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 26,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $564,000 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 $674,221 and its actual total direct labor was 26,500 hours. Required: Compute the company’s plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Answer 1

The company’s plant wide predetermined overhead rate for the year is $23.70

Step-by-step explanation:

The computation of the predetermined overhead rate is shown below:

= (Fixed manufacturing overhead cost ÷ direct labor-hours) + variable manufacturing overhead per direct labor hour

= ($564,000 ÷ 26,000 hours) + $2 per direct labor hour

= $21.69 + $2 per direct labor hour

= $23.70

The other items which are mentioned in the question are not considered in the computation part. So, these parts should be ignored.