Ad-on International is an advertising company.It estimated the overhead costs for March,2014,to be $950,000 and direct labor hours to be 5,000 hours.In March,it incurred overhead costs of $1,150,000 and 5,100 labor hours.
-What is the predetermined overhead rate for March,2014?

Question

Ad-on International is an advertising company.It estimated the overhead costs for March,2014,to be $950,000 and direct labor hours to be 5,000 hours.In March,it incurred overhead costs of $1,150,000 and 5,100 labor hours. 
-What is the predetermined overhead rate for March,2014?

Quizplus · Accepted Answer

Predetermined overhead rate (POHR) = Estimated overhead costs / Estimated direct labor hours.

POHR = $950,000 / 5,000 hours

POHR = $190 per direct labor hour.

As actual overhead costs incurred in March are higher than estimated overhead costs, this indicates that actual overhead costs exceeded the budget, but it's important to note that the POHR remains constant regardless of the actual overhead costs incurred.

Ad-On International Is an Advertising Company