connec All applicable exercises are available with McGrawHil

connec All applicable exercises are available with McGraw-Hill\'s Connect Accounting. EXERCISE 3-1 Compute the Predetermined Overhead Rate [LO3-1] Haris Fabrics computes its predetermined overhead rate annually on the basis of direct labor- hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required ul facturing overhead expenses for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris\'s actual manufacturing overhead for the year was $123,900 and its actual total direct labor was 21,000 hours. Required: Compute the company\'s predetermined overhead rate for the year.

Solution

Pred etermined overhead rate = Fixed overhead rate + variable overhead rate

Fixed overhead rate = 94000 / 20000 = 4.70

Pred etermined overhead rate = 4.70 + 2

= 6.70 per Direct labor hour