Business

Question

Capalbo Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the laborhours for the upcoming year at 52,000 labor-hours. The estimated variable manufacturing overhead was $2.78 per labor-hour and the estimated total fixed manufacturing overhead was $1,192,360. The actual labor-hours for the year turned out to be 52,600 labor-hours. The predetermined overhead rate for the recently completed year was closest to: A. $2.78. B. $25.45. C. $25.71. D. $22.93.

1 Answer

  • Answer:

    Predetermined manufacturing overhead rate= $25.71 per direct labor hour

    Explanation:

    To calculate the predetermined manufacturing overhead rate we need to use the following formula:

    Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

    Predetermined manufacturing overhead rate= (1,192,360 / 52,000) + 2.78

    Predetermined manufacturing overhead rate= 22.93 + 2.78

    Predetermined manufacturing overhead rate= $25.71 per direct labor hour

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