Logan Products computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 38,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $567,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $4.00 per direct labor-hour. Logan’s actual manufacturing overhead for the year was $788,136 and its actual total direct labor was 38,500 hours.

Question

Required:
Compute the company’s predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Answer 1

Y= a + bx
y= 567,000 + (4.00* 38,000)
y= 567,000 + 152,000
y= 719,000 estimated manufacturing overhead

Predetermined overhead rate= estimated manufacturing overhead/ estimated allocation base

POR= 719,000/38,000
POR= $18.92 per direct labor hour

Answer 2

4 X 38000 =152000
567000 + 152000/38000= 18.92