Doric Agricultural Corporation uses a predetermined overhead allocation rate based on the direct labor cost.The manufacturing overhead cost allocated during the year is $270,000.The details of production and costs incurred during the year are as follows: $$\begin{array} { | l | l | }
\hline \text { Actual direct materials cost } & \$ 811,500 \
\hline \text { Actual direct labor cost } & \$ 170,000 \
\hline \text { Actual overhead costs incurred } & \$ 260,000 \
\hline \text { Total direct labor hours } & \$ 580 \text { hours } \
\hline
\end{array}$$ What is the predetermined overhead allocation rate applied by the corporation? (Round your answer to two decimal places.)

Question

Doric Agricultural Corporation uses a predetermined overhead allocation rate based on the direct labor cost.The manufacturing overhead cost allocated during the year is $270,000.The details of production and costs incurred during the year are as follows: $$\begin{array} { | l | l | } 
\hline \text { Actual direct materials cost } & \$ 811,500 \
\hline \text { Actual direct labor cost } & \$ 170,000 \
\hline \text { Actual overhead costs incurred } & \$ 260,000 \
\hline \text { Total direct labor hours } & \$ 580 \text { hours } \
\hline
\end{array}$$ What is the predetermined overhead allocation rate applied by the corporation? (Round your answer to two decimal places.)

Quizplus · Accepted Answer

To find the predetermined overhead allocation rate, we need to divide the total manufacturing overhead cost allocated by the total direct labor cost. Based on the information provided, the total direct labor cost is $170,000 ($65,000 + $75,000 + $30,000). Therefore, the predetermined overhead allocation rate is 158.82% ($270,000 ÷ $170,000 = 1.5882 or 158.82%). So, the correct choice is C.

Doric Agricultural Corporation Uses a Predetermined Overhead Allocation Rate Based