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 20,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $123,900 and its actual total direct labor was 21,000 hours. Required: Compute the company's plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Answer 1

Answer:

Predetermined overhead rate= $6.7

Explanation:

Giving the following information:

Estimated that 20,000 direct labor-hours.

Estimated $94,000 of fixed manufacturing overhead cost.

Variable manufacturing overhead of $2.00 per direct labor-hour.

Harris's actual manufacturing overhead cost for the year was $123,900 and its actual total direct labor was 21,000 hours.

Predetermined overhead rate= estimated total manufacturing overhead costs/ total amount of allocation base

Predetermined overhead rate= (94000+ 2*20000)/20000

Predetermined overhead rate= $6.7