The managers of Red Heart Draperies are planning for the upcoming year.In years past, the company has applied overhead based on direct labor costs.However, management believes that direct labor hours are a better basis for applying overhead and plans to use direct labor hours to apply overhead for the upcoming year. What is the predetermined overhead rate for the upcoming year (round all answers to the nearest cent)?

Question

The managers of Red Heart Draperies are planning for the upcoming year.In years past, the company has applied overhead based on direct labor costs.However, management believes that direct labor hours are a better basis for applying overhead and plans to use direct labor hours to apply overhead for the upcoming year.  What is the predetermined overhead rate for the upcoming year (round all answers to the nearest cent)?

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated total manufacturing overhead by the estimated total direct labor hours. From the information given in the question, we can see that the estimated total manufacturing overhead is $236,600 and the estimated total direct labor hours are 10,840. Therefore, the predetermined overhead rate is $236,600/10,840 = $21.82 per DLH. Option B is the correct answer.

The Managers of Red Heart Draperies Are Planning for the Upcoming