Western , Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $ 640,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Western 's systems consultants provide direct labor at a rate of $ 280 per hour. Clients are billed at 160 % of direct labor cost. Last month, Western 's consultants spent 170 hours on Halbert 's engagement.

Compute Western's predetermined overhead allocation rate per direct labor hour.

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Business

Gunner Kane

10 September, 05:44

Western , Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $ 640,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Western 's systems consultants provide direct labor at a rate of $ 280 per hour. Clients are billed at 160 % of direct labor cost. Last month, Western 's consultants spent 170 hours on Halbert 's engagement.

Compute Western's predetermined overhead allocation rate per direct labor hour.

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Pig · Answer 1

Estimated manufacturing overhead rate = $160 per direct labor hour

Explanation:

Giving the following information:

Estimated overhead = $640,000

Estimated direct labor hours = 4,000

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 640,000/4,000

Estimated manufacturing overhead rate = $160 per direct labor hour