Question

Willem Acre Company had estimated $833,000 of manufacturing overhead (MOH) for the year and 59,500 direct labor (DL) hours, resulting in a predetermined MOH rate of $14 per DL hour. By the end of that year, the company had actually incurred $760,500 of MOH costs and had used a total of 58,500 DL hours on various jobs.

Answer 1

The question deals with calculating manufacturing overhead rates and comparing estimated MOH with actuals, alongside understanding the value of labor based on the cost of labor plus machine costs and revenue generated per worker.

Step-by-step explanation:

Understanding Overhead Rates and Labor Costs

The question revolves around the calculation of manufacturing overhead (MOH) and the application of the predetermined MOH rate to labor hours in a company. With the estimated MOH and direct labor hours provided, Willem Acre Company calculated a predetermined MOH rate. By the end of the year, the actual MOH costs and DL hours were different from the estimates. To determine the actual overhead rate and compare it with the predetermined rate, we also need to consider the actual cost of labor and machine hours as part of total manufacturing costs.

For instance, if we have a cost of labor and machine rate of $24 per hour, calculations like $720 in labor plus $600 in machine costs equal $1,320 help illustrate the total cost at various production levels. Along with this, if widget workers receive $10 per hour and can produce widgets that generate revenue, we can determine their value to the firm while considering wages, quantity of labor demanded, and quantity of labor supplied at different wage rates.