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 26,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $525,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $658,321 and its actual total direct labor was 26,500 hours.

Required:
Compute the company's predetermined overhead rate for the year.

Answer 1

$23.2 per direct labor hour

Step-by-step explanation:

Harris fabrics computes its plantwide determined overhead rate annually in the basis of direct labor hours

Predetermined Overhead rate= Total estimated overhead cost/Total estimated allocation base

The total estimated overhead cost can be calculated as follows

= $525,000 + 3×26,000

= $525,000 + 78,000

= $603,000

Therefore the predetermined overhead rate for the year can be calculated as follows

= $603,000/26,000

= $23.2 per direct labor hour