Company, Inc. applies overhead on the basis of direct labour hours. At the beginning of the year, Company, Inc. estimates overhead to be $540,000, machine hours to be 150,000, and direct labour hours to be 90,000. During January, Company, Inc. has 8,000 direct labour hours and 12,000 machine hours.
-Refer to the Figure.What is the predetermined overhead rate?
A)$4 per machine hour
B)$6 per direct labour hour
C)$40,200
D)$44,000

Question

Quizplus · Accepted Answer

To calculate the predetermined overhead rate, divide the estimated overhead by the estimated direct labour hours: 
Predetermined overhead rate = Estimated overhead / Estimated direct labour hours 
Predetermined overhead rate = $540,000 / 90,000 = $6 per direct labour hour 
Therefore, the answer is B.