Sunland Company manufactures a line of lightweight running shoes. CEO Mark Sunland estimated that the company would incur $3,379,520 in manufacturing overhead during the coming year. Additionally, he estimated the company would operate at a level requiring 236,000 direct labor hours and 617,828 machine hours. Assume that Sinclair Company uses direct labor hours as its manufacturing overhead application base. Calculate the company's predetermined overhead rate.

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Brian

Business

24 September, 22:16

Sunland Company manufactures a line of lightweight running shoes. CEO Mark Sunland estimated that the company would incur $3,379,520 in manufacturing overhead during the coming year. Additionally, he estimated the company would operate at a level requiring 236,000 direct labor hours and 617,828 machine hours. Assume that Sinclair Company uses direct labor hours as its manufacturing overhead application base. Calculate the company's predetermined overhead rate.

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Alina Little · Answer 1

Estimated manufacturing overhead rate = $14.32 per direct labor hour

Explanation:

Giving the following information:

CEO Mark Sunland estimated that the company would incur $3,379,520 in manufacturing overhead during the coming year.

Direct labor hours = 236,000

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 = 3,379,520/236,000 = $14.32 per direct labor hour