Question

Company Dept. A Dept. B
Estimated manufacturing overhead $500,000 $338,000 $162,000
Estimated direct labor cost $250,000 $130,000 $120,000
Actual manufacturing overhead $720,000 $400,000 $320,000
Actual direct labor cost $300,000 $160,000 $140,000
Based on this information, the pre-determined overhead rate per direct labor dollar for Dept. B is $_____.

Answer 1

The pre-determined overhead rate per direct labor dollar for Dept. B is 1.35.

What is manufacturing overhead?

Manufacturing overhead costs are the cost associated with running a manufacturing facility.

Examples of factory overhead include

• indirect labor costs
• factory rent
• depreciation of plants and machinery

• Sales and administrative cost

What is direct labour cost?

The direct labour cost is the cost directly involved in the production of goods and services.

What is  the pre-determined overhead rate per direct labor dollar for Dept. B?

The pre-determined overhead rate per direct labor dollar for Dept. B = Estimated manufacturing overhead / Estimated direct labor cost

= $162,000 / $120,000 = 1.35

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