If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to:
A)$45.78 per DLH
B)$76.87 per DLH
C)$86.68 per DLH
D)$80.07 per DLH

Question

Quizplus · Accepted Answer

To calculate the predetermined overhead rate, we need to divide the estimated total overhead cost by the estimated total direct labor-hours. From the information given in the question, the estimated total overhead cost is $2,600,000 and the estimated total direct labor-hours are 30,000. 
So, the predetermined overhead rate would be:
$2,600,000 ÷ 30,000 DLH = $86.67 per DLH (rounded to two decimal places)
Therefore, the closest choice to the predetermined overhead rate would be C ($86.68 per DLH). Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $1,386,814 ÷ 16,000 DLHs = $86.68 per DLH (rounded)

If the Company Allocates All of Its Overhead Based on Direct