Question

Goodin Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs at the beginning of the year:

Direct materials	$	6,000
Direct labor	$	20,000
Rent on factory building	$	15,000
Sales salaries	$	25,000
Depreciation on factory equipment	$	8,000
Indirect materials	$	2,000
Production supervisor's salary	$	15,000
Advertising	$	49,000

Goodin estimates that 20,000 direct labor-hours will be worked during the upcoming year. The predetermined overhead rate per direct labor-hour will be:

Options

A $2.00

B $3.30

C $1.40

D $7.00

Answer 1

Your Required answer is option A i.e. $2.00

Explanation:

$Predetermined Overhead Rate = \frac{Total Manufacturing Overhead}{Total Direct Labor Hours}$$Predetermined Overhead Rate = \frac{\$40,000}{20000}$

PredeterminedOverhead Rate $2

Working Note:

Rent on Factory Building Depreciation on factory equipment Indirect materials Production supervisor's salary Total Manufacturing Overhead $15,000 $8,000 $2,000 $15,000 $40,000

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