Question

Baker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of 61,400 and 2,000 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to 63,350 and actual direct labor-hours were 1,850. The predetermined overhead rate for the year was closest to:

1) 30%
2) 35%
3) 40%
4) 45%

Answer 1

The predetermined overhead rate for the year is $30.70, which is closest to 30%.

Step-by-step explanation:

The predetermined overhead rate can be calculated by dividing the total estimated overhead by the estimated direct labor-hours. In this case, the predetermined overhead rate is calculated as follows:

Predetermined overhead rate = Total estimated overhead / Estimated direct labor-hours = $61,400 / 2,000 = $30.70

Therefore, the closest predetermined overhead rate for the year is 30%, which corresponds to option 1.