Question

Adirondak Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. ​

Overhead Total Direct Labor Hours DLH per Product
A B
Painting Dept. $250,000 10,000 16 4
Finishing Dept. 75,000 12,000 4 16
Totals $325,000 22,000 20 20 ​ ​

Required:
Calculate the plantwide factory overhead rate for Adirondack Marketing Inc.

a. $6.25 per dlh
b. $14.77 per dlh
c. $0.07 per dlh
d. $25.00 per dlh

Answer 1

Predetermined manufacturing overhead rate= $14.77 per direct labor hour

Step-by-step explanation:

Giving the following information:

Estimated overhead cost for the period= $325,000

Estimated total direct labor hours for the period= 22,000

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= 325,000 / 22,000

Predetermined manufacturing overhead rate= $14.77 per direct labor hour