The 195 Factory produces replacement parts and assemblies for vintage Cessna aircraft. The company's current costing system traces direct material and direct labor costs into individual jobs and assigns overhead costs to jobs using a predetermined overhead rate based on direct labor hours required by the job. All direct labor is paid at the same rate of $30 per hour.
-This year's overhead rate is based on estimated total overhead on $2,000,000 and 10,000 direct labor hours. What is the current overhead rate per labor hour in use?
A) $300,000 per hour
B) $6.67 per hour
C) $200 per hour
D) $333.33 per hour

Question

The 195 Factory produces replacement parts and assemblies for vintage Cessna aircraft. The company's current costing system traces direct material and direct labor costs into individual jobs and assigns overhead costs to jobs using a predetermined overhead rate based on direct labor hours required by the job. All direct labor is paid at the same rate of $30 per hour. 
-This year's overhead rate is based on estimated total overhead on $2,000,000 and 10,000 direct labor hours. What is the current overhead rate per labor hour in use?
A) $300,000 per hour
B) $6.67 per hour
C) $200 per hour
D) $333.33 per hour

Quizplus · Accepted Answer

The overhead rate per labor hour is calculated by dividing the estimated total overhead ($2,000,000) by the estimated total direct labor hours (10,000 hours), which equals $200 per hour.

The 195 Factory Produces Replacement Parts and Assemblies for Vintage