Exercise 41 Compute the Predetermined Overhead Rate LO41 Log

Exercise 4-1 Compute the Predetermined Overhead Rate [LO4-1 Logan Products computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 40,000 direct labor-hours would be required for the period\'s estimated level of production. The company also estimated $511,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $4.00 per direct labor-hour. Logan\'s actual manufacturing overhead for the year was $748,237 and its actual total direct labor was 40,500 hours. Required: Compute the company\'s predetermined overhead rate for the year. (Round your answer to 2 decimal places.) per DLH

Solution

Total variable overhead estimated=(40000 direct labor hours*$4)=$160,000

Hence total overhead esttimated=Total variable overhead+Total fixed manufacturing overhead

=(160000+511000)=$671000

Hence predetermined overhead rate=total overhead esttimated/Estimated direct labor hour

=(671000/40000)

=$16.78 per DLH(Approx).