Walsam Tools applies manufacturing overhead based on direct labor hours.Information concerning manufacturing overhead and labor for August follows: $$\begin{array} { l r r }
& \text { Estim ated } & \text { Actual } \
\text { Overhead cost } & \$ 160,000 & \$ 161,000 \
\text { Direct labor hours } & 8,000 & 8,200 \
\text { Direct labor cost } & \$ 120,000 & \$ 115,800
\end{array}$$ How much is the predetermined overhead rate?

Question

Walsam Tools applies manufacturing overhead based on direct labor hours.Information concerning manufacturing overhead and labor for August follows: $$\begin{array} { l r r } 
& \text { Estim ated } & \text { Actual } \
\text { Overhead cost } & \$ 160,000 & \$ 161,000 \
\text { Direct labor hours } & 8,000 & 8,200 \
\text { Direct labor cost } & \$ 120,000 & \$ 115,800
\end{array}$$ How much is the predetermined overhead rate?

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated overhead cost by the estimated direct labor hours: $160,000 / 8,000 hours = $20.00 per direct labor hour.

Walsam Tools Applies Manufacturing Overhead Based on Direct Labor Hours