Harris Fabrics computes its predetermined overhead rate annually on the basis of

Question

Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 36,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $528,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris's actual manufacturing overhead for the year was $703,233 and its actual total direct labor was 36,500 hours. Required: Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.) Predetermined overhead per DLH rate

Explanation / Answer

Computation of Predetermined Manufacturing OH rate Particulars $ Fixed Manufacturing OH $      5,28,000 Total DLH              36,000 Fixed Manufacturing OH rate per DLH (528000/36000) $            14.67 (+) Variable Rate per DLH $              3.00 Total Mfg rate per DLH $            17.67 Hence Pre determined OH rate is $ 17.67 Note- For computing pre determined rate, actual manufacturing OH and actual DLH are not considered.

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