III. Manufacturing Overhead Co
| III. | Manufacturing Overhead Costs estimated | $ 500,000 | |||
| DirectLabor Hours estimated | 50,000 | ||||
| MachineHours estimated | 250,000 | ||||
| DirectLabor Costs estimated | $ 1,000,000 | ||||
| Determinethe Pre-determined Overhead rate based on the following: | |||||
| a | DirectLabor Hours | ||||
| b | MachineHours | ||||
| c | DirectLabor Cost | ||||
Answer:
Predetermined overhead rate = Estimated manufacturingoverhead cost/Estimated total units in the allocation base
a) Predeterminedoverhead rate based on Direct labourhours
Estimated Manufacturing overheads = 500,000$
Estimated Direct labour Hours = 50,000 hours
Predetermined overhead rate based on direct labour hours= Estimated manufacturing overhead cost/Esimated Directlabour hours
= 500,000/50,000
=$10 per direct labour hours
B) Predeterminedoverhead rate based onMachine hours
Estimated Manufacturing overheads = 500,000$
Estimated Machine Hours = 250,000 hours
Predetermined overhead rate based on Machine hours= Estimated manufacturing overhead cost/EstimatedMachine hours
= 500,000$/250,000
=$2 per machine hours
c)Predeterminedoverhead rate based on Direct labourcost
Predetermined overhead rate based on Direct labout cost= Estimated manufacturing overhead cost/Estimated Directlabour cost
Estimated Manufacturing overheads = 500,000$
Estimated Direct labour coast= 100000 $
=500000/100000
=$5 per labour cost
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