The predetermined overhead rate for manufacturing overhead for 2020 is $4.00 per direct labor hour. Employees are expected to earn $5.00 per hour and the company is planning on paying its employees $100,000 during the year. However, only 75% of the employees are classified as "direct labor." What was the estimated manufacturing overhead for 2020?
A) $60,000.
B) $75,000.
C) $80,000.
D) $93,750.

Question

Quizplus · Accepted Answer

The estimated direct labor cost is 75% of $100,000, which is $75,000. With employees earning $5.00 per hour, the direct labor hours are $75,000 / $5.00 = 15,000 hours. The manufacturing overhead is then 15,000 hours * $4.00 = $60,000.

The Predetermined Overhead Rate for Manufacturing Overhead for 2020 Is