A manufacturing company applies overhead based on direct labor hours. At the beginning of the year, it estimated that overhead costs would be $720,000 and direct labor hours would be 90,000. Actual overhead costs incurred were $754,400, and actual direct labor hours were 92,000. Compute the predetermined overhead rate per direct labor hour.
A) $7.83
B) $8.38
C) $8.20
D) $8.00

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated overhead costs by the estimated direct labor hours: $720,000 / 90,000 hours = $8.00 per direct labor hour.

A Manufacturing Company Applies Overhead Based on Direct Labor Hours