Question

Dobson manufacturing company uses a job order cost system with manufacturing overhead applied to products on the basis of direct labor dollars. at the beginning of the most recent period, the company estimated its total direct labor cost to be $65,000 and its total manufacturing overhead cost to be $91,000. several incomplete general ledger accounts show the transactions that occurred during the most recent accounting period which is given in second requirement. required: 1. calculate the predetermined overhead rate.

Answer 1

We are given that Dobson manufacturing company applies manufacturing overhead to products on the basis of direct labor dollars. That means:

Predetermined overhead rate = Total Estimated Overhead Cost / Total Estimated Direct Labor Cost

We are given that:

Total Estimated Overhead Cost = $91,000

Total Estimated Direct labor Cost =$65,000

Hence, Predetermined overhead rate = 91000/65000 = $1.4 per dollar of Direct labor Cost