Question

Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 43,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $540,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $4.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $787,704 and its actual total direct labor was 43,500 hours.

Required:
Compute the company’s plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Answer 1

$16.56 per direct labor hour.

Step-by-step explanation:

Plant wide predetermined overhead rate for the year

= Total estimated overhead cost ÷ Total estimated allocation base

= $712,000 / 43,000 direct labor hour

= $16.56 per direct labor hour.

Note : Total estimated overhead cost

Fixed manufacturing overhead $540,000

Add: Variable manufacturing overhead ($4 × 43,000 hour) $172,000

Total estimated manufacturing cost $712,000