K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities.The company uses direct labor hours as its overhead allocation base.If 80,000 direct labor hours are planned for this next year,what is the company's plantwide overhead rate?
A)$0.02 per direct labor hour.
B)$46.25 per direct labor hour.
C)$36.25 per direct labor hour.
D)$10 per direct labor hour.
E)$0.10 per direct labor hour.

Question

Quizplus · Accepted Answer

The plantwide overhead rate is calculated by dividing the total estimated overhead costs by the total estimated base activity. Here, the total overhead costs are $2,900,000 (indirect labor) + $800,000 (factory utilities) = $3,700,000. The total base activity is 80,000 direct labor hours. Therefore, the plantwide overhead rate is $3,700,000 / 80,000 hours = $46.25 per direct labor hour.

K Company Estimates That Overhead Costs for the Next Year