Asked by Rachael Oreilly on Apr 25, 2024
Verified
Henkes Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year.At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 66,000 labor-hours.The estimated variable manufacturing overhead was $8.41 per labor-hour and the estimated total fixed manufacturing overhead was $1,533,180.The actual labor-hours for the year turned out to be 68,400 labor-hours.
Required:
Compute the company's predetermined overhead rate for the recently completed year.
Predetermined Overhead Rate
A rate calculated before the period begins, used to allocate overhead costs to products or services based on a certain activity base.
Labor-Hours
Labor-Hours measure the total hours worked by employees, typically within a specified period for payroll or productivity analysis.
Manufacturing Overhead
All indirect costs associated with manufacturing, such as utilities, rent of the production facility, and maintenance.
- Comprehend and compute predetermined overhead rates utilizing machine-hours as the allocation foundation.
- Comprehend the distinction between variable and fixed manufacturing overhead expenses and their impact on overhead rates.
- Evaluate the efficiency of using labor-hours vs. machine-hours as allocation bases for overhead rates.
Verified Answer
Predetermined overhead rate = $2,088,240 ÷ 66,000 labor-hours = $31.64 per labor-hour
Learning Objectives
- Comprehend and compute predetermined overhead rates utilizing machine-hours as the allocation foundation.
- Comprehend the distinction between variable and fixed manufacturing overhead expenses and their impact on overhead rates.
- Evaluate the efficiency of using labor-hours vs. machine-hours as allocation bases for overhead rates.
Related questions
Dallman Corporation Uses a Job-Order Costing System with a Single ...
The Predetermined Overhead Rate for the Casting Department Is Closest ...
The Management of Buelow Corporation Would Like to Investigate the ...
Lightner Corporation Bases Its Predetermined Overhead Rate on the Estimated ...
The Management of Schneiter Corporation Would Like to Investigate the ...