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29) Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to

apply manufacturing overhead to jobs. The Corporation has provided the following estimated
costs for the next year:



Direct materials
Direct labor
Rent on factory building
Sales salaries
Depreciation on factory equipment
Indirect labor
Production supervisor's salary

6,000
20,000
15,000
25,000
8,000
12,000
15,000



Jameson estimates that 20,000 direct labor-hours will be worked during the year. The
predetermined overhead rate per hour will be:
A) $2.50 per direct labor-hour
B) $2.79 per direct labor-hour
C) $3.00 per direct labor-hour
D) $4.00 per direct labor-hour

User Ductran
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1 Answer

5 votes

Answer:

The correct Answer is predetermined overhead rate = $2.50 per direct labor hour.

Step-by-step explanation:

Overhead is those costs required to run a business, but which cannot be directly attributed to any specific, for example, rent, factory overheads, depreciation, indirect labor and production supervisor's salary.

Total manufacturing overheads = Rent of factory building + Depreciation on factory equipment + Indirect labor + Production supervisor's salary

Total manufacturing overheads = $15,000 + $8,000 + $12,000 + $15,000

Total manufacturing overheads = $50,000

Total Direct labor hours in the year = 20,000

Predetermined Overhead Rate per labor hour = $50,000/20,000

Predetermined Overhead Rate per labor hour = $2.50 per direct labor hour

Note:

Sales salary is a selling expense and not a product cost hence it will not be included for calculating predetermined overhead rate.

Direct material and labor are direct expenses, they are product cost but not a part of Overhead cost.

User Jansma
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