Question

Longobardi Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 35,600 labor-hours. The estimated variable manufacturing overhead was $6.76 per labor-hour and the estimated total fixed manufacturing overhead was $906,732. The actual labor-hours for the year turned out to be 32,000 labor-hours. The predetermined overhead rate for the recently completed year was closest to:

Answer 1

Predetermined Overhead rate = Estimated manufacturing overhead / Estimated total labor hours

= [906,732 + (35600*6.76)] / 35,600

= 1,147,388 / 35,600

= 32.23 per direct labor hour