Question

Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year: Direct materials $ 6,000 Direct labor $ 20,000 Rent on factory building $ 15,000 Sales salaries $ 25,000 Depreciation on factory equipment $ 8,000 Indirect labor $ 12,000 Production supervisor's salary $ 15,000 Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be:

Answer 1

Answer:

The overhead rate is $ 5.05

Explanation:

Direct materials $ 6000

Direct labour         $ 20,000

Rent on factory $ 15,000

Salaries                $ 25,000

Depreciation         $ 8,000

Indirect labour $ 12,000

Supervisor salary  $ 15,000

Total costs  $101,000

Direct hours  20,000

First, sum all the total costs to arrive at the total costs.

Then divide the total costs by the labour hours to arrive at overhead rate.

Overhead rate = total cost/labour hours

 =101,000/20,000

 =$ 5.05