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

The predetermined overhead rate is calculated as follows:

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total direct labor-hours

Using the data given in the question,

Predetermined overhead rate = $1,140,000 ÷ 120,000 direct labor-hours
= $9.50 per direct labor-hour

Therefore, the closest choice is (C) $9.50 per direct labor-hour.

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