Western , Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $ 640,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Western 's systems consultants provide direct labor at a rate of $ 280 per hour. Clients are billed at 160 % of direct labor cost. Last month, Western 's consultants spent 170 hours on Halbert 's engagement.

Compute Western's predetermined overhead allocation rate per direct labor hour.

Question

Rylie Hayden

Business

27 December, 11:10

Western , Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $ 640,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Western 's systems consultants provide direct labor at a rate of $ 280 per hour. Clients are billed at 160 % of direct labor cost. Last month, Western 's consultants spent 170 hours on Halbert 's engagement.

Compute Western's predetermined overhead allocation rate per direct labor hour.

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Answers (1)

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Yahir Holmes · Answer 1

Estimated manufacturing overhead rate = $160 per direct labor hour

Explanation:

Giving the following information:

Estimated overhead = $640,000

Estimated direct labor hours = 4,000

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 = 640,000/4,000

Estimated manufacturing overhead rate = $160 per direct labor hour