Calculate the company's predetermined manufacturing overhead rate, assuming the company uses direct labor hours as its allocation
Question:
Calculate the company's predetermined manufacturing overhead rate, assuming the company uses direct labor hours as its allocation base.
The answer I came up with is $9.25, I am uncertain of this answer and asking for guidance on it,
Type of Cost Estimated total cost for the year
Selling and Administrative salaries and expenses $210,000
Direct Labor (Estimated 40,000 DL hours @ average wage rate of $12 per hour) $480,000
Indirect plant labor $40,000
Plant utilities $50,000
Purchases of direct materials $1,400,000
Lease and property taxes on the plant $120,000
Marketing expenses $30,000
Depreciation on production equipment (equipment originally costing $700,000 three year ago is being depreciated over a 5 year useful life using straight-line depreciation.No salvage value is expected.) $140,000
Indirect materials to be used in the plant $20,000
My answer is as follows
Indirect plant labor $40,000
Plant utilities $50,000
Lease and property taxes on plant $120,000
Depreciation on Production Equipment (700000-0)/5 $140,000
Indirect materials to be used in the plant $20,000
Total Manufacturing overhead $370,000
Estimated Direct Labor hours $40,000
Predetermined overhead rate per direct labor 370000/40000 $9.25