California Customs Designs, LLC, is a business that customizes motorcycles and a

Question

California Customs Designs, LLC, is a business that customizes motorcycles and automobiles according to the customers' specifications. The company uses a job-order accounting system. Factory overhead is applied to production on the basis of direct labor hours. Estimated overhead costs for the coming year amount to $860,000. The company expects to operate at 80% of capacity, utilizing 16,000 direct labor hours. Inputs: Estimated total factory overhead costs Estimated activity base direct labor hours Output: Predetermined factory overhead rate per direct labor hour a. Enter the estimated total overhead cost and the estimated direct labor hours in the Inputs area. b. Enter the formula that divides total overhead cost by the number of direct labor hours.

Explanation / Answer

Predetermined factory overhead rate = $860000/16000 = $53.75 per direct labor hour Hope this helps!

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