Question

Based on this information, the predetermined overhead rate per direct labor dollar for Dept. B is $ ________. (Round your answer to 2 decimal places.)

Company
a) Dept. A
b) Dept B.
Estimated manufacturing overhead
a) $500,000
b) $338,000
c) $162,000
Estimated direct labor cost
a) $250,000
b) $130,000
c) $120,000
Actual manufacturing overhead
a) $720,000
b) $400,000
c) $320,000
Actual direct labor cost
a) $300,000
b) $160,000
c) $140,000

Answer 1

The predetermined overhead rate for Dept. B is $2.12 per direct labor dollar, calculated by dividing the estimated manufacturing overhead by the estimated direct labor cost. This rate provides a basis for allocating overhead costs and is crucial for budgeting and cost control. Additionally, comparing the actual overhead rate, derived from the actual manufacturing overhead and direct labor cost, reveals a variance of $0.38.

Step-by-step explanation:

Calculate Predetermined Overhead Rate:

Predetermined Overhead Rate = Estimated Manufacturing Overhead / Estimated Direct Labor Cost

For Dept. B: $338,000 / $160,000 = $2.12 per direct labor dollar.

Calculate Actual Overhead Rate:

Actual Overhead Rate = Actual Manufacturing Overhead / Actual Direct Labor Cost

For Dept. B: $400,000 / $160,000 = $2.50 per direct labor dollar.

Analyze Overhead Variance:

Overhead Variance = Actual Overhead Rate - Predetermined Overhead Rate

Overhead Variance = $2.50 - $2.12 = $0.38.

So, the predetermined overhead rate per direct labor dollar for Dept. B is $2.12, and there is a positive overhead variance of $0.38.