Austin Company uses a job order cost accounting system. The company\'s executive

Question

Austin Company uses a job order cost accounting system. The company's executives estimated that direct labor would be $2,640,000 (220,000 hours at $12/hour) and that factory overhead would be $1,520,000 for the current period. At the end of the period, the records show that there had been 200,000 hours of direct labor and $1,220,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead allocation rate? (Round your answer to two decimal places.)

$6.22 per direct labor hour.

$7.60 per direct labor hour.

$6.91 per direct labor hour.

$5.55 per direct labor hour.

$6.63 per direct labor hour.

Austin Company uses a job order cost accounting system. The company's executives estimated that direct labor would be $2,640,000 (220,000 hours at $12/hour) and that factory overhead would be $1,520,000 for the current period. At the end of the period, the records show that there had been 200,000 hours of direct labor and $1,220,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead allocation rate? (Round your answer to two decimal places.)

Explanation / Answer

predetermined rate = estimated overhead/ estimated / hours

                             = 1,520,000 / 220,000

                              = $ 6.91 per hour

correct option is "C"

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