Question

Req 2: First, fill in the missing costs. Then, calculate the company’s predetermined manufacturing overhead rate, assuming the company uses direct labor hours as its allocation base.
Type of Cost	Estimated total cost for the year
Selling and Administrative salaries and expenses	$                      210,000
Direct Labor (Estimated 40,000 DL hours @ average wage rate of $11 per hour)	$                      440,000
Indirect plant labor	$                         60,000
Plant utilities	$                         70,000
Purchases of direct materials	$                  1,500,000
Lease and property taxes on the plant	$                      120,000
Marketing expenses	$                         30,000
Depreciation on production equipment (equipment originally costing $700,000 three year ago is being depreciated over a 5 year useful life using straight-line depreciation. No salvage value is expected.)	$                      140,000
Indirect materials to be used in the plant	$                         20,000
Total MOH
Predetermined Overhead Rate =		per direct labor hour

Answer 1

Total MOH = Indirect plant labor + Plant utilities + Lease and property taxes on the plant + Depreciation on production equipment + Indirect materials to be used in the plant

= 60,000 + 70,000 + 120,000 + 140,000 + 20,000

= $410,000

Estimated direct labor hours = 40,000 hours

Predetermined overhead rate = Total MOH/Estimated direct labor hours

= 410,000/40,000

= $10.25 per direct labor hour

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