Y Company has the following estimated costs for the year: Direct materials $58,0

Question

Y Company has the following estimated costs for the year:

                          Direct materials                            $58,000

                          Direct labor                                      24,000

                          Factory supplies                             20,100

                          Factory supervision                        30,800

                          Marketing research                         40,200

                          Factory rent 46,200

Sales salaries 46,000

   Factory insurance 62,300

Y Company estimates that machines will be operated for 61,000 hours during the year, and 1,500 direct labor hours will be worked during the year. If overhead is allocated on the basis of direct labor cost, what will the overhead rate be?                       

Explanation / Answer

labour cost per hour = 24000/ 1500

= $ 16 per hour

overhead rate = 16 * 1500/61000 X

= 3.934 X            where X is the no. of labour hours used

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