Question

O'Reilly Corporation uses direct labor-hours to calculate its annual plantwide predetermined overhead. For the current period's estimated level of production, O'Reilly Corporation estimated that 40,000 direct labor-hours would be required. Estimated fixed manufacturing overhead cost is $556,000 for the current period and variable manufacturing overhead cost of $3.00 per direct labor-hour. O'Reilly Corporation's actual manufacturing overhead cost for the period was $749,250 and its actual total direct labor was 40,500 hours.

Required:
Compute the company's plantwide predetermined overhead rate for the year.

Answer 1

$16.90

Step-by-step explanation:

Plantwide predetermined overhead rate = Fixed OH Rate + Variable OH Rate

Plantwide predetermined overhead rate = (Estimated fixed manufacturing overhead / direct labor hours + Variable OH Rate

Plantwide predetermined overhead rate = ($556,000 / 40,000) + $3.00

Plantwide predetermined overhead rate = $13.9 + $3.00

Plantwide predetermined overhead rate = $16.90