Logan Products computes its predetermined overhead rate annually on the basis of

Question

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%u2019s estimated level of production. The company also estimated $466,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Logan%u2019s actual manufacturing overhead for the year was $713,400 and its actual total direct labor was 41,000 hours.

Compute the company%u2019s predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Explanation / Answer

Y = a + bx Y = $466,000 + ($3.00 x 40,000) Y = $466,000 + $120,000 Y = $586,000 estimated manufacturing overhead Predetermined overhead rate = estimated manufacturing overhead / estimated allocation base POR = $586,000 / 40,000 POR = $14.65 per direct labor-hour

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