Asked by Rojita Malla on Jun 19, 2024
Verified
If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to:
A) $45.78 per DLH
B) $76.87 per DLH
C) $86.68 per DLH
D) $80.07 per DLH
Predetermined Overhead Rate
An estimated rate used to allocate manufacturing overhead costs to individual units of production, calculated in advance of the period.
Direct Labor-Hours
The total hours of labor directly involved in the production of goods.
- Compute predetermined overhead rates in traditional costing systems.
Verified Answer
AM
Ashlin McCamishJun 19, 2024
Final Answer :
C
Explanation :
To calculate the predetermined overhead rate, we need to divide the estimated total overhead cost by the estimated total direct labor-hours. From the information given in the question, the estimated total overhead cost is $2,600,000 and the estimated total direct labor-hours are 30,000.
So, the predetermined overhead rate would be:
$2,600,000 ÷ 30,000 DLH = $86.67 per DLH (rounded to two decimal places)
Therefore, the closest choice to the predetermined overhead rate would be C ($86.68 per DLH).
So, the predetermined overhead rate would be:
$2,600,000 ÷ 30,000 DLH = $86.67 per DLH (rounded to two decimal places)
Therefore, the closest choice to the predetermined overhead rate would be C ($86.68 per DLH).
Explanation :
Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $1,386,814 ÷ 16,000 DLHs = $86.68 per DLH (rounded)
= $1,386,814 ÷ 16,000 DLHs = $86.68 per DLH (rounded)
Learning Objectives
- Compute predetermined overhead rates in traditional costing systems.