Question

X Company estimates that direct labor hours for the year will be 1,200, and machines will be operated for 65,000 hours. If overhead is allocated on the basis of direct labor cost, what will the 2020 overhead rate be

Answer 1

Answer:

$8.34 per direct labor cost

Explanation:

The computation of the overhead rate is shown below:

= Factory overhead ÷ Direct labor cost

where,

Factory overhead = Factory supplies + Factory supervision + Factory rent + Factory insurance

= $21,900 + $29,200 + $45,700 + $63,400

= $160,200

And, the direct labor cost is $19,200

So, the overhead rate is

= $160,200 ÷ $19,200

= $8.34 per direct labor cost