In: Accounting
Sirmons Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 85,000 labor-hours. The estimated variable manufacturing overhead was $10.77 per labor-hour and the estimated total fixed manufacturing overhead was $1,465,700. The actual labor-hours for the year turned out to be 74,000 labor-hours. The predetermined overhead rate for the recently completed year was closest to:
$10.77 per labor-hour
$28.01 per labor-hour
$27.74 per labor-hour
$17.24 per labor-hour
Total Variable overhead estimated=85000*10.77
=$915450
Total overhead estimated=Total Variable overhead estimated+Total fixed overhead estimated
=915450+1,465,700
=$2381150
predetermined overhead rate=Total overhead estimated/Estimated direct labor hours
=$2381150/85000
=$28.01 per labor hour(Approx)