(TCO F) Willow Creek Corporation bases its predetermined overhead rate on the es
ID: 2345966 • Letter: #
Question
(TCO F) Willow Creek 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 labor hours for the upcoming year at 38,500 labor hours. The estimated variable manufacturing overhead was $7.37 per labor hour and the estimated total fixed manufacturing overhead was $601,328. The actual labor hours for the year turned out to be 41,721 labor hours.Required:
Compute the company's predetermined overhead rate for the recently completed year
Explanation / Answer
Total Predetermined Mfg OH = Var Mfg OH + Fixed Mfg OH = 38500*$7.37 + $601,328 = $885,073 SO Predetermined Mfg OH rate = Predetermined Mfg OH/Predetermined Lab hrs = $885,073/38500 = $22.99 So company's predetermined overhead rate for the recently completed year id $22.00
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