Question

Steeler Towel Company estimates its overhead to be $203,000. It expects to have 58,000 direct labor hours costing $1,015,000 in labor and utilizing 14,500 machine hours. Calculate the predetermined overhead rate using: Round your answers to two decimal places. A. Direct labor hours $fill in the blank 1 per direct labor hour B. Direct labor dollars $fill in the blank 2 per direct labor dollar C. Machine hours $fill in the blank 3 per machine hour

Answer 1

Answer and Explanation:

The computation of the predetermined overhead rate in the following cases are shown below:

As we know that

Predetermined overhead rate = Estimated overhead ÷ activity level

1.

= $203,000 ÷ 58,000

= $3.50 per direct labor hour

2.  

= $203,000 ÷ $1,015,000

= $0.20 per direct labor dollar

3.

= $203,000 ÷ 14,500

= $14.00 per machine hour