Question

Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 34,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $505,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $638,351 and its actual total direct labor was 34,500 hours.

Exercise 2-1 Compute a Predetermined Overhead Rate (LO2-1) Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 34,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $505,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $638,351 and its actual total direct labor was 34,500 hours. Required: Compute the company's plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.) Predetermined overhead rate per DLH

Answer 1

Answer : $16.85

Predetermined overhead rate = Variable MOH per DLH + Fixed MPH per DLH

Variable MOH per Direct Labor Hour =$2.00

Fixed MOH per Direct labor hour = Estimated Fixed OH / Estimated Direct labor Hours = 505,000 / 34,000 =$14.85

Predetermined overhead rate = $2.00+ $ 14.85 = $16.85 (Answer)