Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year:Direct materials ... $6,000Direct labor ... $20,000Rent on factory building ... $15,000Sales salaries ... $25,000Depreciation on factory equipment ... $8,000Indirect labor ... $12,000Production supervisor's salary ... $15,000Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be:A) $2.50 per direct labor-hourB) $2.79 per direct labor-hourC) $3.00 per direct labor-hourD) $4.00 per direct labor-hour

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Business

Dexter Levy

22 September, 21:42

Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year:Direct materials ... $6,000Direct labor ... $20,000Rent on factory building ... $15,000Sales salaries ... $25,000Depreciation on factory equipment ... $8,000Indirect labor ... $12,000Production supervisor's salary ... $15,000Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be:A) $2.50 per direct labor-hourB) $2.79 per direct labor-hourC) $3.00 per direct labor-hourD) $4.00 per direct labor-hour

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Answers (1)

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Isabell Hill · Answer 1

A) $2.50 per direct labor-hour

Explanation:

The computation of the predetermined overhead rate is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) : (estimated direct labor-hours)

where,

Estimated manufacturing overhead = Rent on factory building + Depreciation on factory equipment + Indirect labor + Production Supervisor's salary

= $15,000 + $8,000 + $12,000 + $15,000

= $50,000

And, the estimated direct labor hours is 20,000

So, the rate is

= $50,000 : 20,000

= $2.5 per direct labor-hour