Question

Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $123,900 and its actual total direct labor was 21,000 hours. Required: Compute the company's plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Answer 1

Answer:

Predetermined overhead rate= $6.7

Explanation:

Giving the following information:

Estimated that 20,000 direct labor-hours.

Estimated $94,000 of fixed manufacturing overhead cost.

Variable manufacturing overhead of $2.00 per direct labor-hour.

Harris's actual manufacturing overhead cost for the year was $123,900 and its actual total direct labor was 21,000 hours.

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

Predetermined overhead rate= (94000+ 2*20000)/20000

Predetermined overhead rate= $6.7

Answer 2

The Overhead rate is a cost allotted to the manufacture of a product or service.

The plantwide predetermined overhead rate of the company would be $6.7.

What is the overhead rate?

Overhead costs are costs that are not directly responsible to a cost object. Indirect costs may be either fixed or variable. Some indirect costs may be overhead.

Computation of the overhead rate:

According to the question,

Estimated direct labor-hours =  20,000,

Estimated fixed manufacturing overhead cost = $94,000,

Variable manufacturing overhead = $2/- direct labor-hour,

The actual manufacturing overhead cost for the year = $123,900, and

Actual total direct labor = 21,000 hours.

$\text{Predetermined Overhead Rate}=\dfrac{\text{Estimated Total Manufacturing Overhead Costs}}{\text{Total Amount of Allocation Base}}\\\\\\\text{Predetermined Overhead Rate}= \dfrac{(\ 94,000+ 2\times20,000)}{20,000}\\\\\\\text{Predetermined Overhead Rate}=\ 6.7$

Therefore, The overhead rate would be $6.7.

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