Prather 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: Recently, Job P513 was completed with the following characteristics:
The predetermined overhead rate is closest to:
A) $13.30 per direct labor-hour
B) $3.80 per direct labor-hour
C) $9.50 per direct labor-hour
D) $5.70 per direct labor-hour

Question

Prather 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:  Recently, Job P513 was completed with the following characteristics:
 The predetermined overhead rate is closest to:
A) $13.30 per direct labor-hour 
B) $3.80 per direct labor-hour 
C) $9.50 per direct labor-hour 
D) $5.70 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) = $285,000 + ($3.80 per direct labor-hour × 50,000 direct labor-hours) = $285,000 + $190,000 = $475,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $475,000 ÷ 50,000 direct labor-hours = $9.50 per direct labor-hour

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