Question

Shire Computers predetermined overhead rate is based on direct labor cost. Management estimates the company will incur $747,500 of overhead costs and $575,000 of direct labor cost for the year. During March, Shire began and completed Job 13-56. What is the predetermined overhead rate for the year

Answer 1

Answer:

Estimated manufacturing overhead rate= $1.3 per direct labor dollar

Explanation:

Giving the following information:

Management estimates the company will incur $747,500 of overhead costs and $575,000 of direct labor cost for the year.

To calculate the estimated 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= 747,500/575,000= $1.3 per direct labor dollar