Question

Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1,2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $21,000, direct labor $ 12,600, and manufacturing overhead $16,800. As of January 1, Job 49 had been completed at a cost of $94,500 and was part of finished goods inventory. There was a $15,750 balance in the Raw Materials Inventory account.
During the month of January, Lott Company began production on Jobs 51 and 52,and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $128,100 and $ 165,900, respectively. The following additional events occurred during the month.

1. Purchased additional raw materials of $94,500 on account.

2. Incurred factory labor costs of $73,500. Of this amount $16,800 related to employer payroll taxes.

3. Incurred manufacturing overhead costs as follows:

4. Assigned direct materials and direct labor to job as follows.

Job No. Direct materials Direct Labor
50 $10,500 $5,250
51 40,950 26,250
52 31,500 21,000
Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $ 882,000, direct labor costs of $735,000, and direct labor hours of 21,000 for the year.

Predetermined overhead rate _____%

Answer 1

Answer:

Estimated manufacturing overhead rate= $42 per direct labor hour.

Explanation:

Giving the following information:

Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $ 882,000, direct labor costs of $735,000, and direct labor hours of 21,000 for the year.

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 882,000/21,000= $42 per direct labor hour.