Coleridge Company estimates that its production workers will work 125,000 direct labor hours during the upcoming period and that overhead costs will amount to $750,000.Assume overhead to be allocated on the basis of direct labor hours.What predetermined overhead rate would be used to apply overhead to production during the period?
A) $6.00 per direct labor hour
B) $0.67 per direct labor hour
C) $0.67 per unit
D) $6.00 per unit

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the total estimated overhead costs by the total estimated amount of the allocation base, in this case, direct labor hours. So, $750,000 / 125,000 hours = $6.00 per direct labor hour.

Coleridge Company Estimates That Its Production Workers Will Work 125,000