Templeton Widgets applies manufacturing overhead based on direct labor hours.It budgeted 123,000 direct labor hours at $11.50 per labor hour and incurred 125,000 direct labor hours at an actual total labor cost of $1,500,000.It incurred $720,000 of manufacturing overhead and estimated the manufacturing overhead cost to be $707,250 for the period.What was the predetermined overhead rate?

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated manufacturing overhead cost by the estimated amount of the allocation base (in this case, direct labor hours). Thus, the predetermined overhead rate = $707,250 / 123,000 hours = $5.75 per direct labor hour.

Templeton Widgets Applies Manufacturing Overhead Based on Direct Labor Hours