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.
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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