Question

EB4.

LO 6.1Cozy, Inc., manufactures small and large blankets. It estimates $950,000 in overhead during the manufacturing of 360,000 small blankets and 120,000 large blankets. What is the predetermined overhead rate if a small blanket takes 2 hours of direct labor and a large blanket takes 3 hours of direct labor?

Answer 1

$0.879

Step-by-step explanation:

Given that,

Overhead during the manufacturing of blankets = $950,000

Small blankets manufactured = 360,000

Large blankets manufactured = 120,000

Therefore,

Predetermined overhead rate:

= Overhead during the manufacturing ÷ (Estimated hours in the allocation base)

= $950,000 ÷ [(360,000 × 2) + (120,000 × 3)]

= $950,000 ÷ 1,080,000

= $0.879