Question

K Company estimates that overhead costs for the next year will be $3,600,000 for indirect labor and $910,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 110,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?a. $0.02 per direct labor hour. b. $3273 per direct lebor hour.c. $32.73 per direct labor hour. d. $41 00 per direct labor hour.

Answer 1

Option D : “Company's plantwide overhead rate = $41.00 per Direct Labor Hour”

Step-by-step explanation:

Company's plantwide overhead rate can be calculated by;

Company's plantwide overhead rate =

Total Estimated Manufacturing overhead costs / Total Direct Labor Hours

= [$36,00,000 + $910,000] / 110,000 (Direct Labor Hours)

= $45,10,000 / 110,000 (Direct Labor Hours )

= $41.00 per Direct Labor Hour