Capalbo Corporation bases its predetermined overhead rate on the estimated labor

Question

Capalbo 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 52,000. the estimated variable manufacturing overhead was $2.78 per labor hour and the estimated total fixed manufacturing overhead was $1,192,360. The actual labor hours for the year turned out to be 52, 600 labor hours. The predetermined overhead rate for the recently completed year was closest to:

Explanation / Answer

Hi,

Please find the answer as follows:

Predetermined Overhead Rate = Variable Overhead Rate + Fixed Overhead Rate = 2.78 + 1192360/52000 = $25.71

Answer is $25.71.

Thanks.

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