Question

Purves Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $121,000 and 10,000 direct labor-hours for the period. The company incurred actual total fixed manufacturing overhead of $113,000 and 10,900 total direct labor-hours during the period. The predetermined overhead rate is closest to

Answer 1

Predetermined manufacturing overhead rate= $12.1 per direct labor hour

Step-by-step explanation:

Giving the following information:

Estimated total fixed manufacturing overhead= $121,000

Estimated direct labor hours= 10,000

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

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

Predetermined manufacturing overhead rate= 121,000/10,000

Predetermined manufacturing overhead rate= $12.1 per direct labor hour