Question

Fortify, Inc. uses a predetermined manufacturing overhead rate based on direct labor hours to apply its...

Fortify, Inc. uses a predetermined manufacturing overhead rate based on direct labor hours to apply its indirect product costs to jobs. The following information has been collected for the previous year:

Direct materials $ 162,000
Direct labor 212,000
Sales commissions 112,000
Indirect labor 62,000
Rent on office equipment 37,000
Depreciation — factory building 87,000
Utilities — factory 221,000

Fortify used 37,000 direct labor hours and 62,000 machine hours during the previous year. What is the predetermined overhead rate per direct labor hour?

Homework Answers

Answer #1

Answer :- Calculation of Predetermined overhead rate per direct labor hour :-

Predetermined overhead rate = Manufacturing overhead cost/ Total direct labor hours

Predetermined overhead rate = (Indirect labor + Depreciation-Factory building + Utilities-Factory) / Total direct labor hours

Predetermined overhead rate = ($62,000+$87,000+$221,000)/ 37,000

Predetermined overhead rate = $370,000 / 37,000

Predetermined overhead rate = $10 per direct labor hour

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