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 20,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $123,900 and its actual total direct labor was 21,000 hours. Required: Compute the company's plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Explanation / Answer

Answer:

Predetermined Overhead Rate = Estimated Manufacturing Overhead / Estimated Allocation base
Estimated Manufacturing Overhead = Estimated Fixed Manufacturing Overhead + Estimated Variable Manufacturing Overhead
Estimated Manufacturing Overhead = $94,000 + ($2.00* 20,000)
Estimated Manufacturing Overhead = $94,000 + $40,000
Estimated Manufacturing Overhead = $134,000

Estimated Allocation base = 20,000 DLH

Predetermined Overhead Rate = 134,000 / 20,000
Predetermined Overhead Rate = $6.70

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