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
Need fast response please
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:
Total estimated overhead cost = Variable overhead cost + Fixed overhead cost
= $120,000 + $96,000
= $216,000
*Calculation of predetermined overhead rate:
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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