Question

Sheridan Decorating uses a job order cost system to collect the costs of its interior decorating business. Each client’s consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year. Estimated overhead $1,040,000 Actual overhead $1,039,800 Estimated decorator hours 40,000 Actual decorator hours 39,500 The company uses the account Operating Overhead in place of Manufacturing Overhead and the account Service Contracts in Process in place of Work in Process. Compute the predetermined overhead rate. Predetermined overhead rate

Answer 1

Answer: $26 per hour

Step-by-step explanation:

The Predetermined rate is used by the company to apportion overhead to Work in process inventory and is calculated before production starts and for this reason uses estimated figures.

Predetermined Overhead rate = Estimated overhead/ Estimated decorator hours

= 1,040,000/ 40,000

= $26 per hour