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 950 500 1,450
Machine-hours 3,200 2,400 5,600
Direct labor-hours 2,700 1,100 3,800
Direct materials costs $9,600 $3,900 $13,500
Direct labor costs 63,700 37,700 101,400
Manufacturing overhead
costs 130,340
Total costs $245,240
Required:
Compute the predetermined overhead rate assuming that Tiger Furnishings uses direct labor-hours to allocate overhead costs.

Answer 1

Tiger Furnishings

The predetermined overhead rate

= $34.30 per direct labor hour

Step-by-step explanation:

a) Data and Calculations:

Basic Dominator Total

Units produced 950 500 1,450

Machine-hours 3,200 2,400 5,600

Direct labor-hours 2,700 1,100 3,800

Direct materials costs $9,600 $3,900 $13,500

Direct labor costs 63,700 37,700 101,400

Manufacturing overhead costs 130,340

Total costs $245,240

b) Computation of the Predetermined overhead rate

= Total manufacturing overhead costs divided by total direct labor hours

= $130,340/3,800

= $34.30 per direct labor hour