Everbuilt Company had no jobs in progress at the beginning of June and no beginn

Question

Everbuilt Company had no jobs in progress at the beginning of June and no beginning inventories. It started only two jobs during June—Job L and Job W. Job L was completed and sold by the end of June and Job W was incomplete at the end of June. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs L and W (all data and questions relate to the month of June):

Estimated total fixed manufacturing overhead. . . . . . . . . . . . . . . . . . . . . . . . . .        $30,000

Estimated variable manufacturing overhead per

direct labor-hour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.00

Estimated total direct labor hours to be worked. . . . . . . . . . . . . . . . . . . . . . . . .        6,000

Total actual manufacturing overhead costs incurred. . . . . . . . . . . . . . . . . . . . .         $37,500

Job L             Job W

Direct materials. . . . . . . . . . . . . . . . . . . . . . $39,000           $24,000

Direct labor cost. . . . . . . . . . . . . . . . . . . . . . $62,000           $22,500

Actual direct labor hours worked. . . . . . . .    4,200             1,500

What is the company’s predetermined overhead rate?

Please give step by step instructions

Explanation / Answer

Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated direct labor hours

= (30000 + 3*6000) / 6000 = $ 8 per direct labor hour

Variable portion of Predetermined overhead rate = $3

Fixed portionPredetermined overhead rate = $5

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