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 40,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $514,000 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 $704,700 and its actual total direct labor was 40,500 hours.

Compute the company's predetermined overhead rate for the year.

Compute the company's predetermined overhead rate for the year.

Explanation / Answer

Predetermine overhead Rate = Estimated Fixed Manufacturing overhead / Estmated labor hours                                                              = 514000 / 40000                                                              = 12.85

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