Nadelson Incorporated makes a single product-an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: The variable component of the predetermined overhead rate is closest to:
A) $1.26 per labor-hour
B) $1.20 per labor-hour
C) $1.64 per labor-hour
D) $1.57 per labor-hour

Question

Nadelson Incorporated makes a single product-an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:  The variable component of the predetermined overhead rate is closest to:
A) $1.26 per labor-hour 
B) $1.20 per labor-hour 
C) $1.64 per labor-hour 
D) $1.57 per labor-hour

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate = $54,000/45,000 labor-hours
= $1.20 per labor-hour

Nadelson Incorporated Makes a Single Product-An Electrical Motor Used in Many