Question

Total Cost Formula Davis Company has analyzed its overhead costs and derived a general formula for their behavior: $60,000 + $14 per direct labor hour employed. The company expects to use 50,000 direct labor hours during the next accounting period. What overhead rate per direct labor hour should be applied to jobs worked during the period? Round answer to two decimal places. Overhead rate per direct labor hour

Answer 1

$15.20 per direct labor hour

Step-by-step explanation:

The computation is shown below

Given that

General formula = $60,000 + $14 per direct labor hours

Direct labor hours = 50,000

So, overhead is

= $60,000 + $14 × 50,000 direct labor hours

= $60,000 + $700,000

= $760,000

So, the overhead rate per direct labor hour is

= $760,000 ÷ 50,000 direct labor hours

= $15.20 per direct labor hour