Question

Chelsea, Inc. uses the job costing method and designates the direct labor hours as the allocation base. In 2016, the total estimated and actual overhead costs for Chelsea, Inc. was $250,000 and $275,000, respectively. The total estimated and actual direct labor hours for chelsea, Inc. was 25,000 and 28,000, respectively. What is the predetermined manufacturing overhead (MOH) rate per direct labor hour (DLH)?

Answer 1

$10 per hour

Step-by-step explanation:

As for the information provided,

Predetermined overhead rate is the rate that is determined based on the expected or estimated level of activity, that is then charged to actual level of activity, which gives us over-applied or under-applied overheads.

In the given case, estimated overheads = $250,000

Estimated direct labor hours = 25,000

Thus, predetermined overhead rate = $250,000/25,000 = $10 per hour.