Thursday, 10 April 2014

Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year it estimated that its total manufacturing overhead would be $576,000 and the total direct labor would be 30,000 hours. Its actual total manufacturing overhead for the year was $740,000 and its actual total direct labor was 31,000 hours.



Brief Exercise 2-3 Compute the Predetermined Overhead Rate [LO3]
Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year it estimated that its total manufacturing overhead would be $576,000 and the total direct labor would be 30,000 hours. Its actual total manufacturing overhead for the year was $740,000 and its actual total direct labor was 31,000 hours.

Required:
Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
 
  Predetermined overhead rate
$  
per DLH


Explanation:
The predetermined overhead rate is computed as follows:
 



  Estimated total manufacturing overhead
$576,000  

  ÷ Estimated total direct labor hours (DLHs)
30,000  
DLHs
  = Predetermined overhead rate
$19.20  
per DLH