Dallas Company uses a job order costing system. The company's executives estimated that direct labor would be $3,360,000 (240,000 hours at $14/hour) and that factory overhead would be $1,540,000 for the current period. At the end of the period, the records show that there had been 220,000 hours of direct labor and $1,240,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead rate? (Round your answer to two decimal places.)

A) $5.17 per direct labor hour.

B) $7.00 per direct labor hour.

C) $6.42 per direct labor hour.

D) $5.84 per direct labor hour.

E) $6.25 per direct labor hour.

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Business

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26 August, 19:40

Dallas Company uses a job order costing system. The company's executives estimated that direct labor would be $3,360,000 (240,000 hours at $14/hour) and that factory overhead would be $1,540,000 for the current period. At the end of the period, the records show that there had been 220,000 hours of direct labor and $1,240,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead rate? (Round your answer to two decimal places.)

A) $5.17 per direct labor hour.

B) $7.00 per direct labor hour.

C) $6.42 per direct labor hour.

D) $5.84 per direct labor hour.

E) $6.25 per direct labor hour.

+2

Answers (1)

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Thornton · Answer 1

Option (C) is correct.

Explanation:

Given that,

Estimated overhead cost = $1,540,000

Estimated direct labors (in dollars) = $3,360,000

Estimated direct labor hours = 240,000

Actual overhead cost = $1,240,000

Predetermined overhead rate:

= Estimated overhead cost : Estimated direct labor hours

= $1,540,000 : 240,000

= $6.42 per direct labor hour