Question

Beta Corporation is planning operations for the coming year. Beta uses normal costing and applies overhead on the basis of direct labor hours. The estimated overhead cost amounts to $10,000,000, estimated direct labor hours are 125,000, estimated direct labor cost amounts to $3,200,000, and estimated direct materials cost is $23,000,000. What is Beta's predetermined overhead rate?

Answer 1

Answer:

The correct answer is $80 per hour.

Explanation:

According to the scenario, the given data are as follows:

Estimated overhead cost = $10,000,000

Estimated direct labor hours = 125,000 hours

Direct labor cost amount = $3,200,000

Direct material cost = $23,000,000

So, we can calculate the predetermined overhead rate by using following formula:

Predetermined overhead rate = Estimated overhead /Estimated Direct labor hours

= $10,000,000 / 125,000 hours

= $80 per hour

Hence, the predetermined overhead rate is $80 per hour.