Question

A company uses direct labor hours as its allocation base. Management estimates the company will have 10,000 hours of direct labor during the year and total overhead costs of $120,000. The predetermined overhead rate will be $_____________ per hour.

Answer 1

The predetermined overhead rate will be $12 per hour.

Step-by-step explanation:

Given:

Working hours of direct labor= 10,000

Total overhead costs= $120,000

To Find:

The predetermined overhead rate.

Solution:

It can be calculated as follows,

Total overhead costs/Working hours of direct labor

=120000/10000

= 12

So the predetermined overhead rate will be $12 per hour.