Helland Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: The predetermined overhead rate is closest to:
A) $2.50 per direct labor-hour
B) $11.30 per direct labor-hour
C) $6.30 per direct labor-hour
D) $8.80 per direct labor-hour

Question

Helland Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data:  The predetermined overhead rate is closest to:
A) $2.50 per direct labor-hour 
B) $11.30 per direct labor-hour 
C) $6.30 per direct labor-hour 
D) $8.80 per direct labor-hour

Quizplus · Accepted Answer

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $189,000 + ($2.50 per direct labor-hour × 30,000 direct labor-hours) = $189,000 + $75,000 = $264,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $264,000 ÷ 30,000 direct labor-hours = $8.80 per direct labor-hour

Helland Corporation Uses a Job-Order Costing System with a Single