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Longobardi Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 46,000 labor-hours. The estimated variable manufacturing overhead was $6.25 per labor-hour and the estimated total fixed manufacturing overhead was $1,026,260. The actual labor-hours for the year turned out to be 41,200 labor-hours. The predetermined overhead rate for the recently completed year was closest to:
A) $28.56 per labor-hour
B) $22.31 per labor-hour
C) $6.25 per labor-hour
D) $31.16 per labor-hour
Predetermined Overhead Rate
A rate used to allocate manufacturing overhead costs to products or job orders, calculated before the production period based on estimated costs.
Labor-Hours
Labor-hours amount to the total time workers spend on production or service delivery, an important factor in determining labor efficiency and cost control.
Variable Manufacturing Overhead
Costs that vary with the level of production output, such as supplies and indirect labor expenses, not directly tied to the production volume.
- Ascertain the set overhead rate using diverse measures like machine-hours, labor-hours, and direct labor costs.
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Learning Objectives
- Ascertain the set overhead rate using diverse measures like machine-hours, labor-hours, and direct labor costs.
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