Question

Wallis company manufactures only one product and uses a standard cost system. the company uses a predetermined plantwide overhead rate that relies on direct labor-hours as the allocation base. all of the company's manufacturing overhead costs are fixed—it does not incur any variable manufacturing overhead costs. the predetermined overhead rate is based on a cost formula that estimated $2,886,000 of fixed manufacturing overhead for an estimated allocation base of 288,600 direct labor-hours. wallis does not maintain any beginning or ending work in process inventory.

Answer 1

Estimated manufacturing overhead rate= $10 per direct labor hour

Step-by-step explanation:

Giving the following information:

estimated manufacturing overhead= $2,886,000

estimated direct labor dollars= 288,600

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 2,886,000/288,600= $10 per direct labor hour