Question

Multiple Choice Question 47 Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 105000 500 orders Machine Setup Setups 283500 450 setups Machining Machine hours 1462500 125000 MH Assembly Parts 1170000 1000000 parts Inspection Inspections 285000 500 inspections If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is

Answer 1

Predetermined overhead rate= $22.53 per direct labor hour

Step-by-step explanation:

Giving the following information:

Direct labor hours are estimated at 100,000 for the year.

Total estimated overhead for the period= (105,000 + 283,500 + 1,462,500 + 117,000 + 285,000) = $2,253,000

To calculate the predetermined overhead rate, we need to use the following formula:

Predetermined overhead rate= total estimated overhead / total amount of allocation rate

Predetermined overhead rate= 2,253,000 / 100,000

Predetermined overhead rate= $22.53 per direct labor hour