Harold Hill Corp, a manufacturer of musical instruments, uses a budgeted factory

Question

Harold Hill Corp, a manufacturer of musical instruments, uses a budgeted factory overhead rate to apply overhead to production. The following data is available for 2007:


Item...................................................................Amount
Budgeted Factory Overhead...............................$675,000
Budgeted Machine Hours.....................................20,000
Actual direct labour cost....................................$482,000
Budgeted direct labor cost.................................$450,000


If the company uses estimated "direct labor costs" as its activity base, calculate the overhead application rate. Answer in Percentage.

Explanation / Answer

Budgeted Labor costs is 450,000 budgeted overheard is 675,000 So the overhead per labor hour is 675,000/450,000 = 1.6875$ per hour 1.6875 * 482,000 = $813,375 813,375 / 482,000 = 168.75% applied overhead rate

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