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21 May, 16:39

EA1.

LO 6.1Steeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using:

Direct labor hours

Direct labor dollars

Machine hours

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  1. 21 May, 17:40
    0
    Instructions are listed below.

    Explanation:

    Giving the following information:

    Steeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours.

    For each allocation base we need to use the following formula:

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

    Direct labor hours:

    Estimated manufacturing overhead rate = 250,000/100,000 = $2.5 per direct labor hour

    Direct labor dollars:

    Estimated manufacturing overhead rate = 250,000/2,500,000 = $0.1 per direct labor dollar

    Machine hours:

    Estimated manufacturing overhead rate = 250,000/12,500=$20 per machine hour
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