Austin Company uses a Job order cost accounting system. The company\'s executive

Question

Austin Company uses a Job order cost accounting system. The company's executives estimated that direct labor would be 6,000,000 (600,000 hours at 10/hour) and that factory overhead would be 3,900,000 for the current period. At the end of the period, the records show that there had been 260,000 hours of direct labor and 3,600,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead allocation rate? 6.50 per direct labor hour. 6.00 per direct labor hour. 15.00 per direct labor hour. 7.80 per direct labor hour. 14.59 per direct labor hour.

Explanation / Answer

estimated oh allocation rate= 3900000/600000=6.50

estimated oh allocation for actual hrs = 3900000/260000= 15

actual oh allocation rate as per records= 3600000/260000=13.85

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