Question

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour. Multiple choice question. $25.00

Answer 1

The predetermined overhead rate per direct labor hour is:$19.53.

Predetermined overhead rate

First step

Direct labor hours= 4×8,000

Direct labor hours= 32,000 hours

Second step

Predetermined overhead rate=Estimated overhead costs/Direct labor hours

Predetermined overhead rate=$625,000/32,000

Predetermined overhead rate=$19.53 per direct labor hour

Inconclusion the predetermined overhead rate per direct labor hour is:$19.53.

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