Question

Jameson Company uses a predetermine overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for the next year: direct materials - $5,000; direct labor - $19,000; rent on factory building - $16,000; sales salaries - $24,000; depreciation on factory equipment - $7,000; indirect labor - $11,000; production supervisor's salary - $14,000. Jameson estimates that 24,000 direct labor hours will be worked during the year. The predetermined overhead rate per hour will be:A) $2.00.B) $2.79.C) $3.00.D) $4.00.

Answer 1

Answer:

Predetermined overhead rate= $2/hour

Explanation:

Giving the following information:

Direct materials= $5,000

Direct labor= $19,000

Rent on factory building= $16,000

Sales salaries= $24,000

Depreciation on factory equipment= $7,000

Indirect labor= $11,000

Production supervisor's salary= $14,000.

Jameson estimates that 24,000 direct labor hours will be worked during the year.

The predetermined overhead rate per hour= ?

Predetermined overhead rate= Estimated total manufacturing costs/ estimated total amount of allocation base

Predetermined overhead rate= (Rent on factory building + Depreciation on factory equipment + Indirect labor + Production supervisor's salary)/24000

Predetermined overhead rate= (16000 + 7000 + 11000 + 14000)/24000= $2/hour