Question

Trust Company applies overhead based on direct labor hours. At the beginning of the year, Trust estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000. During February, Trust has 5,000 direct labor hours and 10,000 machine hours. What is the predetermined overhead rate? a.$15.00 per machine hour b.$20.00 per direct labor hour c.$18.00 per machine hour d.$14.00 per direct labor hour e.None of these choices are correct.

Answer 1

The correct answer is B.

Step-by-step explanation:

Giving the following information:

At the beginning of the year, Trust estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000.

Overhead is allocated based on direct labor hours. We need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 700,000/35,000 hours= $20 per direct labor hour.