White Company is a consulting firm and applies indirect overhead costs based on billing hours. The firm expects to have $102,000 in indirect costs during the year and bill customers for 8,500 hours. The cost of direct labor is $60 per hour. What is the predetermined overhead allocation rate for White Company?

predetermined overhead allocation rate is 12 per direct labor hour

Explanation:

given data

indirect costs = $102000

labor time = 8500 hours

cost of labor = $60 per hour

to find out

predetermined overhead allocation rate

solution

we find here predetermined overhead allocation rate by given formula that is

predetermined overhead allocation rate = indirect costs / labor time ... 1

put here value in equation 1 to get rate

predetermined overhead allocation rate = indirect costs / labor time

predetermined overhead allocation rate = 102000 / 8500

predetermined overhead allocation rate = 12

so predetermined overhead allocation rate is 12 per direct labor hour