Exercise 4-1 Compute the Predetermined Overhead Rate [LO4-1 Logan Products compu
ID: 2396048 • Letter: E
Question
Exercise 4-1 Compute the Predetermined Overhead Rate [LO4-1 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's estimated level of production. The company also estimated $511,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $4.00 per direct labor-hour. Logan's actual manufacturing overhead for the year was $748,237 and its actual total direct labor was 40,500 hours. Required: Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.) per DLHExplanation / Answer
Total variable overhead estimated=(40000 direct labor hours*$4)=$160,000
Hence total overhead esttimated=Total variable overhead+Total fixed manufacturing overhead
=(160000+511000)=$671000
Hence predetermined overhead rate=total overhead esttimated/Estimated direct labor hour
=(671000/40000)
=$16.78 per DLH(Approx).
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