Question

Logan Products computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 29,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $508,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Logan's actual manufacturing overhead for the year was $656,884 and its actual total direct labor was 29,500 hours. Required: Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.) Predetermined overhead rate: _____ Per DLH

Answer 1

Predetermined overhead rate = 20.52 per DLH

Explanation;

Estimated fixed manufacturing overhead expenses = $508000

Estimated variable manufacturing overhead expenses (29000 * $3) = $87000

Thus, total estimated manufacturing overhead expenses ($508000 + $87000) = $595000

Estimated direct labor hours = 29000

Predetermined overhead rate =

Total estimated manufacturing overhead expenses / Estimated direct labor hours

Predetermined overhead rate ($595000 / 29000) = 20.52 per DLH