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Bear Corp. estimates that it will require 140,000 direct labor-hours to meet the coming period’s estimated...

Bear Corp. estimates that it will require 140,000 direct labor-hours to meet the coming period’s estimated production level. In addition, the company estimates total fixed manufacturing overhead at $250,000, and variablemanufacturing overhead costs of $3.25 per direct labor hour.

What is the Predetermined Overhead Rate for Bear Corp.?

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Answer #1

Estimated direct labor-hours = 140,000

Estimated total fixed manufacturing overhead = $250,000

Variable manufacturing overhead = $3.25 per direct labor hour.

Predetermined Overhead Rate = Variable manufacturing overhead per direct labor hour + Estimated total fixed manufacturing overhead/Estimated direct labor-hours

= 3.25 + 250,000/140,000

= 3.25 + 1.79

= $5.04 per direct labor hour.

Predetermined Overhead Rate for Bear Corp. = $5.04 per direct labor hour

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