(TCO B) Wahr Corporation bases its predetermined overhead rate on the estimated

Question

(TCO B) Wahr Corporation bases its predetermined overhead rate on the estimated labor hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor hours for the upcoming year at 35,000. The estimated variable manufacturing overhead was $7.25 per labor hour and the estimated total fixed manufacturing overhead was $585,000. The actual labor hours for the year turned out to be 33,000. Required: Compute the company's predetermined overhead rate for the recently completed year.

Explanation / Answer

Overhead rate is calculated by dividing estimated fixed overheads by estimated labor hours

These are based on current years judgement

So, in above case we calculate pre determined rate as

585000 / 35000, = $ 16.71 per labor hour

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