Question

Dafuio Corp uses direct labor hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $224,580. At the end of the year, actual direct labor hours for the tear was 18,200 hours, manufacturing overhead for the year was underapplied by $12,100 and the actual manufacturing overhead was $219,580. The predetermined overhead rate for the year must have been closest to:

1) $11.40/DLH
2) $12.34/DLH
3) $12.06/DLH
4) $10.53/DLH

Answer 1

The predetermined overhead rate for the year must have been closest to $12.34/DLH. Hence, the correct answer is option 2.

Step-by-step explanation:

To determine the predetermined overhead rate, we need to divide the total estimated manufacturing overhead by the estimated direct labor hours. In this case, the total estimated manufacturing overhead was $224,580 and the actual direct labor hours for the year was 18,200 hours.

Predetermined overhead rate = Total estimated manufacturing overhead / Estimated direct labor hours

Predetermined overhead rate = $224,580 / 18,200 hours

Predetermined overhead rate ≈ $12.34/DLH

Therefore, the predetermined overhead rate for the year must have been closest to $12.34/DLH.