Trisdale, Inc., manufactures and sells two products: Product V5 and Product X3. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: The company's total manufacturing overhead is $372,695. If the company allocates all of its overhead based on direct labor-hours, the predetermined overhead rate would be closest to:
A)$24.95 per DLH
B)$49.69 per DLH
C)$90.88 per DLH
D)$19.67 per DLH

Question

Trisdale, Inc., manufactures and sells two products: Product V5 and Product X3. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:  The company's total manufacturing overhead is $372,695. If the company allocates all of its overhead based on direct labor-hours, the predetermined overhead rate would be closest to:
A)$24.95 per DLH 
B)$49.69 per DLH 
C)$90.88 per DLH 
D)$19.67 per DLH

Quizplus · Accepted Answer

To calculate the predetermined overhead rate, we need to divide the total manufacturing overhead by the total direct labor-hours.

Total direct labor-hours = (Expected production of Product V5 x DLH per unit of Product V5) + (Expected production of Product X3 x DLH per unit of Product X3) 
= (7,000 x 3) + (3,000 x 5) 
= 21,000 + 15,000 
= 36,000

Predetermined overhead rate = Total manufacturing overhead / Total direct labor-hours 
= $372,695 / 36,000 
= $10.35 per DLH

Therefore, the closest option is B) $49.69 per DLH.