Question

Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 32,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $557,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $679,453 and its actual total direct labor was 32,500 hours.

Required:
Compute the company’s plantwide predetermined overhead rate for the year.

Answer 1

Predetermined manufacturing overhead rate= $19.41 per direct labor hour

Step-by-step explanation:

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= (557,000 / 32,000) + 2

Predetermined manufacturing overhead rate= $19.41 per direct labor hour