Harris Fabrics computes its plantwide predetermined overhead rate annually on th

Question

Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 31,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $559,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $712,916 and its actual total direct labor was 31,500 hours.

Compute the company’s plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Explanation / Answer

Total projected variable overhead=(31000 direct labor hours*$3)=$93000

Hence total estimated overhead cost= variable overhead+fixed overhead

=(93000+559000)=$652000

Hence plantwide predetermined overhead rate=total estimated overhead cost/estimated direct labor hours

=(652000/31000)

which is equal to

=$21.03(Approx).

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