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The predetermined overhead rate for manufacturing overhead for 2020 is $4.00 per direct labor hour. Employees...

The predetermined overhead rate for manufacturing overhead for 2020 is $4.00 per direct labor hour. Employees are expected to earn $5.00 per hour and the company is planning on paying its employees $200,000 during the year. However, only 80% of the employees are classified as "direct labor." What was the estimated manufacturing overhead for 2020?

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Answer #1

Estimated manufacturing overhead for 2020 = [(Payment to employees x 75%) / Expected earnings per hour] x Predetermined overhead rate for manufacturing overhead

= [($200,000 x 75%) / $5.00 per hour ] x $4.00 per direct labor hour

= ($150,000 / 5) x 4

= $120,000

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