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:

A) $2.50 per direct labor-hour

B) $2.79 per direct labor-hour

C) $3.00 per direct labor-hour

D) $4.00 per direct labor-hour

Answer 1

Answer:

The correct answer is A.

Explanation:

Giving the following information:

Rent on factory building= $15,000

Depreciation on factory equipment= $8,000

Indirect labor= $12,000

Production supervisor's salary= $15,000

Total overhead= $50,000

Jameson estimates that 20,000 direct labor-hours will be worked during the year

To calculate the predetermined manufacturing overhead rate, we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 50,000/20,000= $2.5 per direct labor hour