Elkland Heating & Cooling installs and services commercial heating and cooling systems. Elkland uses job costing to calculate the cost of its jobs. Overhead is allocated to each job based on the number of direct labor hours spent on that job. At the beginning of the current year, Elkland estimated that its overhead for the coming year would be $61,500. It also anticipated using 4,100 direct labor hours for the year. In November, Elkland started and completed the following two jobs: Job 101 Job 102Direct Material used $1,500 $10,500Direct labor hour used 155 82What is Elkland's predetermined overhead rate based on direct labor hours?

Question

Tyree Hicks

Business

11 December, 09:33

Elkland Heating & Cooling installs and services commercial heating and cooling systems. Elkland uses job costing to calculate the cost of its jobs. Overhead is allocated to each job based on the number of direct labor hours spent on that job. At the beginning of the current year, Elkland estimated that its overhead for the coming year would be $61,500. It also anticipated using 4,100 direct labor hours for the year. In November, Elkland started and completed the following two jobs: Job 101 Job 102Direct Material used $1,500 $10,500Direct labor hour used 155 82What is Elkland's predetermined overhead rate based on direct labor hours?

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Answers (1)

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Jake Jackson · Answer 1

Estimated manufacturing overhead rate = $15 per direct labor hour

Explanation:

Giving the following information:

Overhead is allocated to each job based on the number of direct labor hours spent on that job.

The estimated overhead = $61,500.

Estimated direct labor hours = 4,100

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 = 61,500/4,100 = $15 per direct tlabor hour