K Company estimates that overhead costs for the next year will be $3,700,000 for indirect labor and $960,000 for factory utilities. The comp

K Company estimates that overhead costs for the next year will be $3,700,000 for indirect labor and $960,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 125,000 direct labor hours are planned for this next year, what is the company’s plantwide overhead rate?

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  1. Answer:

    Predetermined manufacturing overhead rate= $37.28 per direct labor hour

    Explanation:

    Giving the following information:

    Estimated overhead= 3,700,000 + 960,000= $4,660,000

    Estimated direct labor hours= 125,000

    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= 4,660,000/125,000

    Predetermined manufacturing overhead rate= $37.28 per direct labor hour

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