Quick Step Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead. The following information is available for the most recent year: If Quick Step Company uses direct labor hours as the allocation base, what would the predetermined manufacturing overhead rate be?

Question

Quick Step Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead. The following information is available for the most recent year:  If Quick Step Company uses direct labor hours as the allocation base, what would the predetermined manufacturing overhead rate be?

Quizplus · Accepted Answer

To calculate the predetermined manufacturing overhead rate using direct labor hours as the allocation base, we need to divide total manufacturing overhead costs by total direct labor hours:
$240,000 / 140,000 = $1.70 per direct labor hour. Therefore, the answer is B.

Quick Step Company Is Debating the Use of Direct Labor