Question

You are provided the following data: Total estimated manufacturing overhead cost of $28,000 (consisting of $13,000 fixed and $15,000 variable) Estimated total allocation base of 7,500 direct labor hours. Calculate the predetermined overhead rate:

a) -$3.73 per direct labor hour
b) -$3.73 per job
c) -$7.46 per direct labor hour
d) None of the above

Answer 1

a) -$3.73 per direct labor hour.

The predetermined overhead rate is calculated by dividing the total estimated manufacturing overhead cost by the estimated total allocation base, giving us $3.73 per direct labor hour.

Step-by-step explanation:

To calculate the predetermined overhead rate, we must divide the total estimated manufacturing overhead cost by the estimated total allocation base of direct labor hours. The total overhead cost is given as $28,000, comprising $13,000 fixed and $15,000 variable costs. The total allocation base is given as 7,500 direct labor hours.

Using the formula:

Predetermined Overhead Rate = Total Estimated Overhead / Total Estimated Allocation Base

We get:

Predetermined Overhead Rate = $28,000 / 7,500 hours = $3.73 per direct labor hour. Therefore, the correct answer is a) -$3.73 per direct labor hour.