Homework SourseHarris Fabrics computes its predetermined overhead rate annu
Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 42,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $564,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris\'s actual manufacturing overhead for the year was $761,964 and its actual total direct labor was 42,500 hours.
| Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 42,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $564,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris\'s actual manufacturing overhead for the year was $761,964 and its actual total direct labor was 42,500 hours. |
Solution
It is not clear what is required to be calculated. I assume it requires calculation of pre-determined overhead rate.
The estimated total manufacturing overhead cost is computed as follows
= $564,000 + ($3.00 per DLH)(42,000 DLHs)= $690,000
Predetermined overhead rate is computed as follows:Estimated total manufacturing overhead÷ Estimated total direct labor hours (DLHs)
Predetermined overhead rate=690000/42000= $16.43 per DLH
