A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs)...
A manufacturer of industrial equipment has a standard costing
system based on standard direct labor-hours (DLHs) as the measure
of activity. Data from the company's flexible budget for
manufacturing overhead are given below:
| Level of activity | 2,700 | DLHs | ||
| Overhead costs at the denominator activity level: | ||||
| Variable overhead cost | $ | 8,900 | ||
| Fixed overhead cost | $ | 36,625 | ||
The following data pertain to operations for the most recent
period:
| Actual hours | 3,000 | DLHs | ||
| Standard hours allowed for the actual output | 2,612 | DLHs | ||
| Actual total variable manufacturing overhead cost | $ | 9,500 | ||
| Actual total fixed manufacturing overhead cost | $ | 37,025 | ||
What is the predetermined overhead rate to the nearest cent?
$15.51.
$15.18.
$17.23.
$16.86.
Homework Answers
Computation the predetermined overhead rate is:
Predetermined overhead rate = Estimated cost of total overhead cost / Number of labor hours
= $45,525 / 2,700 hours
= $16.86
Hence, the predetermined overhead rate is $16.86, that is, the 4th option is correct.
Working note:
Computation of estimated cost of total overhead cost is:
Estimated cost of total overhead cost = Value of estimated variable cost of overhead + Value of estimated fixed cost of overhead
= $8,900 + $36,625
= $45,525
Hence, the estimated cost of total overhead cost is $45,525.
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