Hyu Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 52,000 labor-hours. The estimated variable manufacturing overhead was $2.78 per labor-hour and the estimated total fixed manufacturing overhead was $1,192,360. The actual labor-hours for the year turned out to be 52,600 labor-hours. The predetermined overhead rate for the recently completed year was closest to:
A) $2.78.
B) $25.45.
C) $25.71.
D) $22.93.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the total estimated manufacturing overhead (fixed plus variable) by the estimated labor-hours. The total estimated overhead is $1,192,360 (fixed) + ($2.78 * 52,000) (variable) = $1,336,760. Dividing this by 52,000 labor-hours gives a rate of approximately $25.71 per labor-hour.

Hyu Corporation Bases Its Predetermined Overhead Rate on the Estimated