Shire Computers predetermined overhead rate is based on direct labor cost. Management estimates the company will incur $747,500 of overhead costs and $575,000 of direct labor cost for the year. During March, Shire began and completed Job 13-56. What is the predetermined overhead rate for the year

Question

Julian Dennis

Business

6 May, 21:59

Shire Computers predetermined overhead rate is based on direct labor cost. Management estimates the company will incur $747,500 of overhead costs and $575,000 of direct labor cost for the year. During March, Shire began and completed Job 13-56. What is the predetermined overhead rate for the year

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Sloane Sparks · Answer 1

Estimated manufacturing overhead rate = $1.3 per direct labor dollar

Explanation:

Giving the following information:

Management estimates the company will incur $747,500 of overhead costs and $575,000 of direct labor cost for the year.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 747,500/575,000 = $1.3 per direct labor dollar