Longobardi Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 35,700 labor-hours. The estimated variable manufacturing overhead was $5.93 per labor-hour and the estimated total fixed manufacturing overhead was $805,392. The actual labor-hours for the year turned out to be 33,200 labor-hours. The predetermined overhead rate for the recently completed year was closest to:
A) $28.49 per labor-hour
B) $22.56 per labor-hour
C) $5.93 per labor-hour
D) $30.64 per labor-hour

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the total estimated manufacturing overhead (fixed + variable) by the estimated labor-hours. Total estimated overhead = $805,392 (fixed) + ($5.93 * 35,700) (variable) = $1,017,591. Predetermined overhead rate = $1,017,591 / 35,700 = $28.49 per labor-hour.

Longobardi Corporation Bases Its Predetermined Overhead Rate on the Estimated