Question

Quick Step Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead. The following information is available for the most recent year:

Estimated direct labor cost $500,300
Actual direct labor cost $465,700
Estimated manufacturing overhead costs $425,800
Actual manufacturing overhead costs $350,000
Estimated direct labor hours 250,200
Actual direct labor hours 232,800
If Quick Step Company uses direct labor hours as the allocation base, what would the predetermined manufacturing overhead rate be?
A. $720,366$720,366.B. $399,900$399,900.C. $436,880$436,880.D. $350,100$350,100.

Answer 1

$1.70

Step-by-step explanation:

Note : Quick Step Company uses direct labor hours as the allocation base

therefore,

Predetermined manufacturing overhead rate = Budgeted overheads ÷ Budgeted Activity

= $425,800 ÷ 250,200

= $1.70

Therefore, the Predetermined manufacturing overhead rate would be $1.70