Dagnon Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $299,130. At the end of the year, actual direct labor-hours for the year were 17,400 hours, manufacturing overhead for the year was overapplied by $13,850, and the actual manufacturing overhead was $294,130. The predetermined overhead rate for the year must have been closest to:
A) $17.70
B) $17.19
C) $18.22
D) $16.90

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated manufacturing overhead by the estimated direct labor-hours. The overapplied overhead indicates that the applied overhead was more than the actual overhead. The applied overhead can be calculated as actual overhead plus overapplied amount: $294,130 + $13,850 = $307,980. The predetermined overhead rate is then $307,980 / 17,400 hours = $17.70.

Dagnon Corporation Uses Direct Labor-Hours in Its Predetermined Overhead Rate