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28 August, 18:34

Beta Corporation is planning operations for the coming year. Beta uses normal costing and applies overhead on the basis of direct labor hours. The estimated overhead cost amounts to $10,000,000, estimated direct labor hours are 125,000, estimated direct labor cost amounts to $3,200,000, and estimated direct materials cost is $23,000,000. What is Beta's predetermined overhead rate?

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  1. 28 August, 18:42
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    The correct answer is $80 per hour.

    Explanation:

    According to the scenario, the given data are as follows:

    Estimated overhead cost = $10,000,000

    Estimated direct labor hours = 125,000 hours

    Direct labor cost amount = $3,200,000

    Direct material cost = $23,000,000

    So, we can calculate the predetermined overhead rate by using following formula:

    Predetermined overhead rate = Estimated overhead / Estimated Direct labor hours

    = $10,000,000 / 125,000 hours

    = $80 per hour

    Hence, the predetermined overhead rate is $80 per hour.
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