Question

Hyu 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 52,400 labor-hours. The estimated variable manufacturing overhead was $2.82 per labor-hour and the estimated total fixed manufacturing overhead was $1,196,840. The actual labor-hours for the year turned out to be 53,000 labor-hours. The predetermined overhead rate for the recently completed year was closest to:

Answer 1

The predetermined overhead rate for the recently completed year would be $25.66

Step-by-step explanation:

The predetermined overhead rate is computed as;

= Total estimated manufacturing overhead / estimated direct labor

Where;

Total estimated manufacturing overhead = Estimated total fixed manufacturing overhead + estimated variable manufacturing overhead rate × estimated labor hours

= $1,196,840 + $2.82 × 52,400

= $1,196,840 + $147,768

= $1,344,608

Therefore,

Predetermined rate = $1,344,608 / 52,400 hours

Predetermined rate = $25.66