Question

Banc Corp. Trust is considering either a bankwide overhead rate or department overhead rates to allocate $396,000 of indirect costs. The bankwide rate could be based on either direct labor hours (DLH) or the number of loans processed. The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans. The following information was gathered for the upcoming period: Department DLH Loans Processed Direct Costs Consumer 14,000 700 $ 280,000 Commercial 8,000 300 $ 180,000 Banc Corp. Trust estimates that it costs $400 to analyze and close a commercial loan. What is the overhead rate if Banc Corp. Trust allocates the remaining indirect costs using direct labor hours? Multiple Choice

a. $12.55 per hour.
b. $18.00 per hour.
c. $1,000 per loan.
d. $800 per loan.

Answer 1

overhead rate = 18 per hours

Step-by-step explanation:

given data

indirect costs = $396,000

Department DLH Loans Processed Direct Costs

Consumer 14,000 700 $280,000

Commercial 8,000 300 $180000

to find out

overhead rate

solution

we get here overhead rate that is express as

overhead rate =
`(indirect\ cost)/(total\ DLH)` ...............1

put here value

overhead rate =
`(396000)/(14000+8000)`

overhead rate = 18 per hours