Question

Dallas Company uses a job order costing system. The company's executives estimated that direct labor would be $2,310,000 (210,000 hours at $11/hour) and that factory overhead would be $1,510,000 for the current period. At the end of the period, the records show that there had been 190,000 hours of direct labor and $1,210,000 of actual overhead costs. Using direct labor hours as a base, what was the pre-determined overhead rate?

a. $5.17 per direct labor hour.
b. $7.00 per direct labor hour.
c. $6.42 per direct labor hour.
d. $5.84 per direct labor hour.
e. $6.25 per direct labor hour.

Answer 1

Predetermined manufacturing overhead rate= $7.19 per direct labor hour

Step-by-step explanation:

Giving the following information:

Estimated direct labor hours= 210,000

Estimated overhead costs= $1,510,000

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

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 1,510,000 / 210,000

Predetermined manufacturing overhead rate= $7.19 per direct labor hour