 Business
29 August, 14:44

# Logan Products computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 28,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated \$593,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of \$3.00 per direct labor-hour. Logan's actual manufacturing overhead for the year was \$733,264 and its actual total direct labor was 28,500 hours. Required: Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

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1. 29 August, 16:03
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Predetermined rate = \$24.178

Explanation:

Company's predetermined rate for overhead = Variable + Fixed

Variable provided = \$3 per hour

Fixed = \$593,000/28,000 hours = \$21.1786

Now for actual output fixed expenses will remain fixed = \$593,000

Variable = \$733,264 - \$593,000 = \$140,264

Variable overhead rate per hour = \$140,264/28,500 = \$4.9215

thus predetermined rate = (\$3 X 28,000) + \$593,000

= \$84,000 + \$593,000 = \$677,000/28,000 hours (predetermined)

= \$24.178

Actual = \$733,264/28,500 = \$25.728