A furniture corporation manufactures two models of furniture-Standard and Deluxe.The total manufacturing overhead is $64,350. The company uses direct labor costs as the base to allocate manufacturing overhead.Calculate the predetermined overhead rate.

Question

A furniture corporation manufactures two models of furniture-Standard and Deluxe.The total manufacturing overhead is $64,350.  The company uses direct labor costs as the base to allocate manufacturing overhead.Calculate the predetermined overhead rate.

Quizplus · Accepted Answer

We need to calculate the predetermined overhead rate using the formula:
Predetermined overhead rate = Total manufacturing overhead / Total direct labor cost
We are given the total manufacturing overhead as $64,350, but we need to find the total direct labor cost. This information is not provided in the question, so we cannot determine the precise predetermined overhead rate.
However, we can use the given answer choices to make an educated guess. We know that the predetermined overhead rate is always expressed as a percentage. Therefore, we can eliminate answer choices A and B because they are less than 50%. Answer choice C is too high; it is unlikely that the company allocates 63% of its manufacturing overhead to direct labor. Therefore, the best choice is D, which is 60%. Although we cannot confirm this answer without the direct labor cost information, it is a reasonable approximation based on the given answer choices.

A Furniture Corporation Manufactures Two Models of Furniture-Standard and Deluxe