Question

Dallas Company uses a job-order costing system. The company's executives estimated that direct labor would be $4,800,000 (160,000 hours at $30/hour) and that factory overhead would be $1,400,000 for the current period. At the end of the period, the records show that there had been 190,000 hours of direct labor and $1,100,000 of actual overhead costs.

Using direct labor hours as a base, what was the predetermined overhead rate?
(Round your answer to two decimal places.)

Answer 1

$8.75 per hour

Step-by-step explanation:

The computation of the predetermined overhead rate is shown below:

Predetermined overhead rate = Estimated factory overhead cost ÷ estimated direct labor hours

= $1,400,000 ÷ 160,000 hours

= $8.75 per hour

By dividing the Estimated factory overhead cost with the estimated direct labor hours we can get the predetermined overhead rate