Gerstein 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 total fixed manufacturing overhead cost of $90,000, variable manufacturing overhead of $3.70 per direct labor-hour, and 50,000 direct labor-hours. The company recently completed Job M800 which required 150 direct labor-hours.
-The predetermined overhead rate is closest to:
A) $1.80 per direct labor-hour
B) $5.50 per direct labor-hour
C) $9.20 per direct labor-hour
D) $3.70 per direct labor-hour

Question

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) = $90,000 + ($3.70 per direct labor-hour × 50,000 direct labor-hours) = $90,000 + $185,000 = $275,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $275,000 ÷ 50,000 direct labor-hours = $5.50 per direct labor-hour

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