Question

Tiger Furnishings produces two models of cabinets for home theater

components, the Basic and the Dominator. Data on operations and costs
for March follow:
Basic Dominator Total
Units produced 850 300 1,150
Machine-hours 4,400 2,000 6,400
Direct labor-hours 2,700 2,800 5,500
Direct materials costs $11,000 $3,450 $14,450
Direct labor costs 58,300 32,300 90,600
Manufacturing overhead costs 191,950
Total costs $297,000
Required:
Compute the predetermined overhead rate assuming that Tiger Furnishings
uses direct labor-hours to allocate overhead costs.
Pre-determined overhead rate, per direct labor hour.

Answer 1

211%

$34.9 per direct labor hour

Explanation:

As per the data given in the question,

Pre-determined overhead rate = Total overhead ÷ Direct labor cost

= $191,950 ÷ $90,600

= 211 % of Direct labor hour

Pre-determined overhead rate = Total overhead ÷ Direct labor hours

= $191,950 ÷ $5,500

= $34.9 per direct labor hour

We simply applied the above formulas to determine the value of predetermined overhead rate.