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 42,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $598,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $4.00 per direct labor-hour. Harris's actual manufacturing overhead for the year was $847,369 and its actual total direct labor was 42,500 hours. Required: Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.) Predetermined overhead rate per DLH

Explanation / Answer

Total variable overhead estimated=(42000*4)=$168000

Hence total overhead estimated=(598000+168000)=$766000

Hence predetermined overhead rate=(766000/42000)

which is equal to

=$18.24 per DLH(Approx).

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