Question

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that total factory overhead costs would be 360,000 and direct labor hours would be 30,000. Actual manufacturing overhead costs incurred were377,200, and actual direct labor hours were 36,000. What is the predetermined factory overhead rate per direct labor hour?

1) $10.00
2) $12.00
3) $12.57
4) $10.48

Answer 1

The predetermined factory overhead rate per direct labor hour is calculated by dividing the estimated total factory overhead costs by the estimated total direct labor hours. For the company in question, this rate is $12.00 per direct labor hour.

Step-by-step explanation:

The predetermined factory overhead rate per direct labor hour is calculated by dividing the total estimated factory overhead costs by the total estimated direct labor hours. In this case, the company estimated total factory overhead costs to be $360,000 and direct labor hours to be 30,000 hours.

To find the predetermined factory overhead rate per direct labor hour, we use the formula:

Factory Overhead Rate = Total Estimated Factory Overhead Costs ÷ Total Estimated Direct Labor Hours

Using the figures provided:

Factory Overhead Rate = $360,000 ÷ 30,000 hours

The predetermined factory overhead rate per direct labor hour is therefore $12.00.