Question

A company expected its annual overhead costs to be $1,892,632 and direct labor costs to be...

A company expected its annual overhead costs to be $1,892,632 and direct labor costs to be $1,802,528. Actual overhead was $1,981,535, and actual labor costs totaled $1,294,067. How much is the company’s predetermined overhead rate to the nearest cent?

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QUESTION:-A company expected its annual overhead costs to be $1,892,632 and direct labor costs to be $1,802,528. Actual overhead was $1,981,535, and actual labor costs totaled $1,294,067. How much is the company’s predetermined overhead rate to the nearest cent?

SOLUTIONS:-

As we are given with the following elements of a company:-

Annual overhead costs =   $1,892,632 ,

Annual Direct labor costs =$1,802,528,

Actual overhead costs =  $1,981,535,

and Actual labor costs =  $1,294,067

REQUIREMENT:-.

The company’s predetermined overhead rate to the nearest cent = ?

the formula for predetermined overhead rate

= (ANNUAL OVERHEAD COST/ ANNUAL DIRECT LABOUR COST)*100

On putting the given values in the above formula, we get

= ($1,892,632/$1,802,528)*100

=104.9988%

So, the company’s predetermined overhead rate to the nearest cent = 105%

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