Quick Step Company is debating the use of direct labor cost or direct labor hours as...

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Quick Step Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating

business accounting

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Answer 1

Answer #1

Solution:

Calculation of predetermined manufacturing overhead rate based on direct labor hours :

As per the information given in the question a predetermined manufacturing overhead rate based on direct labour hours, is the allocation base for manufacturing overhead.

The formula for calculating the pre determined manufacturing overhead rate is

= Estimated manufacturing overhead costs / Estimated Direct labor Hours

We know that

Estimated manufacturing overhead costs = $ 425,300 ; Estimated Direct Labor Hours = 250,200 ;

Applying the above information in the formula we have the predetermined manufacturing overhead rate as

= $ 425,300 / 250,200

= $ 1.6998

= $ 1.70 ( when rounded off to the nearest cent )

Thus the pre determined manufacturing overhead rate based on direct labour hours is = $ 1.70 per direct labor hour.

The solution is option C. $ 1.70 per direct labor hour

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Answer 2

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