Nadal Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead. The following information is available for the most recent year: Actual direct labor hours 232 comma 800 Estimated direct labor hours 250 comma 000 Actual manufacturing overhead costs $ 365 comma 900 Estimated manufacturing overhead costs $ 400 comma 400 Actual direct labor cost $ 465 comma 700 Estimated direct labor cost $ 500 comma 600 If Nadal Company uses direct labor hours as the allocation base, what would the predetermined manufacturing overhead rate be? (Round your answer to the nearest cent.)

Question

Business

Gavyn Massey

4 June, 21:37

Nadal Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead. The following information is available for the most recent year: Actual direct labor hours 232 comma 800 Estimated direct labor hours 250 comma 000 Actual manufacturing overhead costs $ 365 comma 900 Estimated manufacturing overhead costs $ 400 comma 400 Actual direct labor cost $ 465 comma 700 Estimated direct labor cost $ 500 comma 600 If Nadal Company uses direct labor hours as the allocation base, what would the predetermined manufacturing overhead rate be? (Round your answer to the nearest cent.)

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Answers (1)

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Cole · Answer 1

Predetermined manufacturing overhead rate = $1.6016 per direct labor hour

Explanation:

Giving the following information:

Estimated direct labor hours 250,000

Estimated manufacturing overhead costs $400,400

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

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

Predetermined manufacturing overhead rate = 400,400 / 250,000

Predetermined manufacturing overhead rate = $1.6016 per direct labor hour