Question

Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor-hours. At the...

 Harris Fabrics 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 \$577,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of \$3.00 per direct labor-hour. Harris's actual manufacturing overhead for the year was \$722,648 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.)

The estimated total manufacturing overhead cost is computed as follows:

Y = \$577,000 + (\$3.00 per DLH)(29,000 DLHs)

 Estimated fixed manufacturing overhead \$577,000 Estimated variable manufacturing overhead(\$3.00 per DLH × 29,000 DLHs) \$87,000 Estimated total manufacturing overhead cost \$664,000

The predetermined overhead rate is computed as follows:

Predetermined overhead rate = Estimated total manufacturing overhead / Estimated total direct labor hours (DLHs) = \$664,000 / 29,000 DLHs = \$22.90 per DLH

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