Question

The 195 Factory produces replacement parts and assemblies for vintage Cessna aircraft. The company s current costing system traces direct material and direct labor costs into individual jobs and assigns overhead costs to jobs using a predetermined overhead rate based on direct labor hours required by the job. All direct labor is paid at the same rate of $30 per hour. For 2018, budgeted total overhead on $2,000,000 and budgeted direct labor hours is 10,000. As of December 31, 2018, the firm incurred $2,200,000 in actual overhead costs were incurred and 9,000 direct labor hours.

What is the PDOH rate the firm used during the year?

Answer 1

Predetermined overhead rate = total budgeted overhead / total budgeted labor hours

2000000/10000 = 200 per labor hour

Predetermined overhead rate = 200 per labor hour