Question

If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is:

Answer 1

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

Step-by-step explanation:

If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is:

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

For example:

Total estimated overhead= $150,000

Allocation base= direct labor hours

Estimated Total number of direct labor hours= 10,000

Predetermined manufacturing overhead rate= 150,000/10,000

Predetermined manufacturing overhead rate= $15 per direct labor hour