Question

Henkes Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 61,000 labor-hours. The estimated variable manufacturing overhead was $11.00 per labor-hour and the estimated total fixed manufacturing overhead was $1,159,000. The actual labor-hours for the year turned out to be 64,600 labor-hours. Required: Compute the company's predetermined overhead rate for the recently completed year. (Round your answer to 2 decimal places.)

Answer 1

$30.00 per labor - hour

Step-by-step explanation:

Computation of the company's predetermined overhead rate for the recently completed year.

First step is to calculate the Variable manufacturing overhead using this formula

Variable manufacturing overhead = Variable manufacturing overhead per labor hour * Budgted labor hours

Let plug in the formula

Variable manufacturing overhead=$11 * 61,000

Variable manufacturing overhead=$671,000

Second step is to calculate Total estimated overhead cost using this formula

Total estimated overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead

Let plug in the formula

Total estimated overhead cost=$671,000 + $1,159,000

Total estimated overhead cost=$1,830,000

Now let calculate the Predetermined overhead rate using this formula

Predetermined overhead rate = Total Estimated overhead cost / Estimated labor hours

Let plug in the formula

Predetermined overhead rate=$1,830,000 / 61,000

Predetermined overhead rate=$30.00 per labor - hour

Therefore the company's predetermined overhead rate for the recently completed year will be $30.00 per labor - hour