Question

EB7.

LO 4.4A company estimates its manufacturing overhead will be $840,000 for the next year. What is the predetermined overhead rate given each of the following independent allocation bases?

Budgeted direct labor hours: 90,615
Budgeted direct labor expense: $750,000
Estimated machine hours: 150,000

Answer 1

$9.27 per hour

112% of labor cost

$5.60 per machine hour

Step-by-step explanation:

Based on Direct labor hour:

= Manufacturing overhead ÷ Budgeted direct labor hours

= $840,000 ÷ 90,615

= $9.27 per hour

Based on direct labor cost:

= Manufacturing overhead ÷ Budgeted direct labor expense

= $840,000 ÷ $750,000

= 112% of labor cost

Based on Machine hour:

= Manufacturing overhead ÷ Estimated machine hours

= $840,000 ÷ 150,000

= $5.60 per machine hour