Wallis company manufactures only one product and uses a standard cost system. the company uses a predetermined plantwide overhead rate that relies on direct labor-hours as the allocation base. all of the company's manufacturing overhead costs are fixed-it does not incur any variable manufacturing overhead costs. the predetermined overhead rate is based on a cost formula that estimated $2,886,000 of fixed manufacturing overhead for an estimated allocation base of 288,600 direct labor-hours. wallis does not maintain any beginning or ending work in process inventory.

Question

Gisselle Proctor

Business

23 September, 02:59

Wallis company manufactures only one product and uses a standard cost system. the company uses a predetermined plantwide overhead rate that relies on direct labor-hours as the allocation base. all of the company's manufacturing overhead costs are fixed-it does not incur any variable manufacturing overhead costs. the predetermined overhead rate is based on a cost formula that estimated $2,886,000 of fixed manufacturing overhead for an estimated allocation base of 288,600 direct labor-hours. wallis does not maintain any beginning or ending work in process inventory.

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George Petty · Answer 1

Estimated manufacturing overhead rate = $10 per direct labor hour

Explanation:

Giving the following information:

estimated manufacturing overhead = $2,886,000

estimated direct labor dollars = 288,600

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 = 2,886,000/288,600 = $10 per direct labor hour