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 26,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $560,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $4.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $723,144 and its actual total direct labor was 26,500 hours.
Required:
Compute the company’s plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)
Total estimated variable overhead=26,000*4=$104,000
Total overhead estimated=Total estimated variable overhead+Total estimated fixed overhead
=$104,000+$560,000=$664,000
Hence plantwide predetermined overhead rate=Total overhead estimated/Estimated direct labor-hours
=$664,000/26,000
=$25.54 per direct labor hour(Approx).
To compute the company's plantwide predetermined overhead rate for the year, we'll use the formula:
Predetermined Overhead Rate = (Estimated Total Manufacturing Overhead Cost) / (Estimated Total Direct Labor Hours)
Given information: Estimated Total Manufacturing Overhead Cost = Fixed Manufacturing Overhead Cost + (Variable Manufacturing Overhead per Direct Labor-Hour * Estimated Total Direct Labor Hours) Estimated Total Direct Labor Hours = 26,000 hours (as stated at the beginning of the year) Fixed Manufacturing Overhead Cost = $560,000 Variable Manufacturing Overhead per Direct Labor-Hour = $4.00
Now, let's calculate the Estimated Total Manufacturing Overhead Cost:
Estimated Total Manufacturing Overhead Cost = $560,000 + ($4.00 * 26,000 hours) Estimated Total Manufacturing Overhead Cost = $560,000 + $104,000 Estimated Total Manufacturing Overhead Cost = $664,000
Now, we can compute the Predetermined Overhead Rate:
Predetermined Overhead Rate = $664,000 / 26,000 hours Predetermined Overhead Rate ≈ $25.54 (rounded to 2 decimal places)
The company's plantwide predetermined overhead rate for the year is approximately $25.54 per direct labor-hour.
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At...
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