In December 2014, Shire Computer's management establishes the 2015 predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur $747,500 of overhead costs and $575,000 of direct labor cost in year 2015. During March 2015, Shire began and completed Job No. 13-56. 1. What is the predetermined overhead rate for year 2015?

Question

Business

Joslyn Guzman

20 September, 08:56

In December 2014, Shire Computer's management establishes the 2015 predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur $747,500 of overhead costs and $575,000 of direct labor cost in year 2015. During March 2015, Shire began and completed Job No. 13-56. 1. What is the predetermined overhead rate for year 2015?

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Abagail · Answer 1

Estimated manufacturing overhead rate = $1.3 per direct labor dollar.

Explanation:

Giving the following information:

Estimated overhead cost = $747,500

Estimated direct labor cost = $575,000

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 747,500/575,000 = $1.3 per direct labor dollar.