Henkes Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 79,000 labor-hours. The estimated variable manufacturing overhead was $11.90 per labor-hour and the estimated total fixed manufacturing overhead was $1,469,400. The actual labor-hours for the year turned out to be 81,100 labor-hours. Required: Compute the company's predetermined overhead rate for the recently completed year.

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Business

Esteban Dennis

29 April, 07:35

Henkes Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 79,000 labor-hours. The estimated variable manufacturing overhead was $11.90 per labor-hour and the estimated total fixed manufacturing overhead was $1,469,400. The actual labor-hours for the year turned out to be 81,100 labor-hours. Required: Compute the company's predetermined overhead rate for the recently completed year.

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Anabelle Chung · Answer 1

Estimated manufacturing overhead rate = $30.5 per direct labor hour

Explanation:

Giving the following information:

Direct labor-hours = 79,000 labor-hours.

The estimated variable manufacturing overhead was $11.90 per labor-hour and the estimated total fixed manufacturing overhead was $1,469,400.

To calculate the predetermined 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 = (1,469,400/79,000) + 11.9 = $30.5 per direct labor hour