Escatel Corporation bases its predetermined overhead rate on the estimated labor
ID: 2427376 • Letter: E
Question
Escatel Corporation bases its predetermined overhead rate on the estimated labor hours for the upcoming year. Data for the most recently completed year appear below.
Estimates made at the beginning of the year
Estimated labor hours
25,000
Estimated variable manufacturing overhead
$7.10
per labor hour
Estimated total fixed manufacturing overhead
$625,000
Actual labor hours for the year
28,000
Required:
Compute the company's predetermined overhead rate for the recently completed year.
Estimates made at the beginning of the year
Estimated labor hours
25,000
Estimated variable manufacturing overhead
$7.10
per labor hour
Estimated total fixed manufacturing overhead
$625,000
Actual labor hours for the year
28,000
Explanation / Answer
Predetermined Fixed Overhead = Total estimated Fixed Manufacturing over heads / Estimated labour hours = 625000/25000 = 25 per Hour Add: Estimated Variable OH Rate = 7.1 Per Hour Total Predetermined Over head Rate = 32.1 Per hour
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