Question

A company expected its annual overhead costs to be $1,800,000 and direct labor hours to be 1,000,000. Actual overhead was $1,740,000, and actual labor hours totaled 1,100,000. How much is the company's predetermined overhead rate to the nearest cent?

Answer 1

The company's predetermined overhead rate is $1.80 per labor hour. The actual overhead rate is approximately $1.58 per labor hour.

Step-by-step explanation:

The company's predetermined overhead rate is calculated by dividing the estimated annual overhead costs by the estimated direct labor hours. In this case, the estimated overhead costs are $1,800,000 and the estimated labor hours are 1,000,000. Therefore, the predetermined overhead rate is $1.80 per labor hour.

To calculate the actual overhead rate, divide the actual overhead costs by the actual labor hours. In this case, the actual overhead costs are $1,740,000 and the actual labor hours are 1,100,000. Therefore, the actual overhead rate is approximately $1.58 per labor hour.