Homework SourseLawler Manufacturing expects the following overhead costs in
Lawler Manufacturing expects the following overhead costs in the current year:
It expects to use 24,000 direct labor hours at a cost of $528,000 and 14,000 machine hours during the year.
Calculate the predetermined overhead allocation rate.
| Indirect material | $44,000 | ||
| Indirect labor | 67,000 | ||
| Depreciation of machinery | 153,000 | ||
| Repair and maintenance on machinery | 46,000 | ||
| Utilities and taxes | 54,000 | ||
| Total | $364,000 |
Solution
Expected cost = $528,000
Total machine hours = 14,000 machine hours
Predetermined overhead allocation rate = Expected cost ÷ Total machine hours = 528,000÷14,000 = $37.71 per machine hour
