Your company computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Your company's actual manufacturing overhead cost for the year was $123,900 and its actual total direct labor was 21,000 hours.
REQUIRED: Compute the company's plantwide predetermined overhead rate for the year. Show your work. (Hint: There are 2 calculations required to arrive at the answer.)
| Fixed overhead rate per direct labor hour | = | Fixed overhead/Total direct labor hours | |||||||||
| = | $ 94,000 | / | 20,000 | ||||||||
| = | $ 4.70 | ||||||||||
| Predetermined overhead rate | = | Fixed overhead per direct labor hour+Variable overhead per direct labor hour | |||||||||
| = | $ 4.70 | + | $ 2.00 | ||||||||
| = | $ 6.70 | ||||||||||
| Thus,company's plantwide predetermined overhead rate for the year is $ 6.70 per direct labor hour. | |||||||||||
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