Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year: Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be:
A) $2.50 per direct labor-hour
B) $2.79 per direct labor-hour
C) $3.00 per direct labor-hour
D) $4.00 per direct labor-hour

Question

Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year:  Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be:
A) $2.50 per direct labor-hour 
B) $2.79 per direct labor-hour 
C) $3.00 per direct labor-hour 
D) $4.00 per direct labor-hour

Quizplus · Accepted Answer

11eacbfc_c6f3_6bee_8ffe_6b78a603473f_TB7552_00 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base
Predetermined overhead rate = $50,000 ÷ 20,000 direct labor-hours = $2.50 per direct labor-hour

Johansen Corporation Uses a Predetermined Overhead Rate Based on Direct