Question

# Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on...

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data:

 Total direct labor-hours 40,000 Total fixed manufacturing overhead cost \$ 96,000 Variable manufacturing overhead per direct labor-hour \$ 3.00

Recently, Job P951 was completed with the following characteristics:

 Number of units in the job 20 Total direct labor-hours 100 Direct materials \$ 755 Direct labor cost \$ 4,000

The predetermined overhead rate is closest to:

• \$2.40 per direct labor-hour

• \$5.40 per direct labor-hour

• \$3.00 per direct labor-hour

• \$8.40 per direct labor-hour

Ans. Option 2nd. \$5.40 per direct labor-hour

Working notes:

Calculation of variable manufacturing overhead cost:

Variable overhead cost = Variable overhead cost per direct labor hour * Estimated direct labor hours

= \$3.00 * 40,000

= \$120,000

*Calculation of total estimated overhead cost:

= \$120,000 + \$96,000

= \$216,000

Predetermined overhead rate = Total estimated overhead cost / Estimated direct labor hours

= \$216,000 / 40,000

= \$5.40 per direct labor-hour

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