Ridley Company estimates that overhead costs for the next year will be $6,870,000 for indirect labor and $450,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 160,000 direct labor hours are budgeted for next year, what is the company's overhead rate per direct labor hour?

Question

Quizplus · Accepted Answer

Overhead rate per direct labor hour = Total estimated overhead costs / Estimated direct labor hours= ($6,870,000 + $450,000) / 160,000 hours= $7,320,000 / 160,000 hours= $45.75 per direct labor hour

Ridley Company Estimates That Overhead Costs for the Next Year