Helland Corporation uses a job-order costing system with a single plantwide pred

Question

Helland Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 30,000 Total fixed manufacturing overhead cost $ 189,000 Variable manufacturing overhead per direct labor-hour $ 2.50 The predetermined overhead rate is closest to: Multiple Choice $2.50 per direct labor-hour $11.30 per direct labor-hour $6.30 per direct labor-hour $8.80 per direct labor-hour

Explanation / Answer

Total variable manufacturing overhead estimated=$2.5*30000 direct labor hours

=$75000

Hence total overhead estimated=Total variable manufacturing overhead estimated+Total fixed manufacturing overhead estimated

=(75000+189000)

=$264000

Hence predetermined overhead rate= total overhead estimated/Total direct labor hours

=$264000/30000

=$8.80 per direct labor-hour.

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