Question

K Company estimates that overhead costs...

K Company estimates that overhead costs for the next year will be $3,700,000 for indirect labor and $890,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. Of 125,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?
a. $0.03 per direct labor hour
b. $36.72 per direct labor hour.
c. $2960 per direct labor hour
d. $712 per direct labor hour
e. $0.14 per direct labor hour

Answer 1

Predetermined manufacturing overhead rate= $36.72 per direct labor hour

Step-by-step explanation:

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

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

Predetermined manufacturing overhead rate= (3,700,000 + 890,000) / 125,000

Predetermined manufacturing overhead rate= 4,590,000 / 125,000

Predetermined manufacturing overhead rate= $36.72 per direct labor hour