The predetermined overhead rate is closest to:

A) $11.90 per direct labor-hour
B) $7.10 per direct labor-hour
C) $9.50 per direct labor-hour
D) $2.40 per direct labor-hour

Question

The predetermined overhead rate is closest to:A) $11.90 per direct labor-hourB) $7.10 per direct labor-hourC) $9.50 per direct labor-hourD) $2.40 per direct labor-hour

Tondalaya Jones-Quinn · Accepted Answer

Final Answer : C, Explanation :  The predetermined overhead rate is calculated by dividing the estimated total manufacturing overhead costs by the estimated total amount of the allocation base. In this question, the estimated manufacturing overhead costs are $380,000 and the estimated allocation base is direct labor-hours of 40,000.$380,000 ÷ 40,000 = $9.50 per direct labor-hour.Therefore, the closest predetermined overhead rate is $9.50 per direct labor-hour, which is choice C. Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base)= $497,000 + ($2.40 per direct labor-hour × 70,000 direct labor-hours)= $497,000 + $168,000 = $665,000Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $665,000 ÷ 70,000 direct labor-hours = $9.50 per direct labor-hour

The predetermined overhead rate is closest to:

A) $11.90 per direct labor-hour
B) $7.10 per direct labor-hour
C) $9.50 per direct labor-hour
D) $2.40 per direct labor-hour

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