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 20,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris's actual manufacturing overhead for the year was $123,900 and its actual total direct labor was 21,000 hours.

Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris's actual manufacturing overhead for the year was $123,900 and its actual total direct labor was 21,000 hours.

Explanation / Answer

Total Estimated Manufacturing Overhead = Fixed Overhead + Variable Overhead Total Estimated Manufacturing Overhead = 94000 + 2 X 20000 = $134000 Predetremined Overhead Rate = Estimated Maufacturing Overhead / Estimated Direct Labor Hrs. Predetremined Overhead Rate = 134000 / 20000 = $6.70 per direct labour hr.

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