Asked by Rachael Oreilly on Apr 25, 2024
Henkes 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 company estimated the labor-hours for the upcoming year at 66,000 labor-hours.The estimated variable manufacturing overhead was $8.41 per labor-hour and the estimated total fixed manufacturing overhead was $1,533,180.The actual labor-hours for the year turned out to be 68,400 labor-hours.
Required:
Compute the company's predetermined overhead rate for the recently completed year.
Predetermined Overhead Rate
A rate calculated before the period begins, used to allocate overhead costs to products or services based on a certain activity base.
Labor-Hours
Labor-Hours measure the total hours worked by employees, typically within a specified period for payroll or productivity analysis.
Manufacturing Overhead
All indirect costs associated with manufacturing, such as utilities, rent of the production facility, and maintenance.
- Comprehend and compute predetermined overhead rates utilizing machine-hours as the allocation foundation.
- Comprehend the distinction between variable and fixed manufacturing overhead expenses and their impact on overhead rates.
- Evaluate the efficiency of using labor-hours vs. machine-hours as allocation bases for overhead rates.
Learning Objectives
- Comprehend and compute predetermined overhead rates utilizing machine-hours as the allocation foundation.
- Comprehend the distinction between variable and fixed manufacturing overhead expenses and their impact on overhead rates.
- Evaluate the efficiency of using labor-hours vs. machine-hours as allocation bases for overhead rates.
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