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8 May, 19:05

Dallas Company uses a job order costing system. The company's executives estimated that direct labor would be $3,750,000 (250,000 hours at $15/hour) and that factory overhead would be $1,550,000 for the current period. At the end of the period, the records show that there had been 230,000 hours of direct labor and $1,250,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead rate? (Round your answer to two decimal places.)

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  1. 8 May, 19:13
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    Allocated overhead = $1,430,600

    Explanation:

    Giving the following information:

    The company's executives estimated that direct labor would be $3,750,000 (250,000 hours at $15/hour) and that factory overhead would be $1,550,000 for the current period.

    The records show that there had been 230,000 hours of direct labor.

    Using direct labor hours as a base.

    Predetermined overhead rate = total estimated manfacturing overhead for the period / total amount of allocation base

    Predetermined overhead rate = 1555000/250000 = $6.22 per hour

    Allocated overhead = Predetermined overhead rate*actual hours = 6.22 * 230000 = $1,430,600
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