Companies calculate overhead rates so that they can have a more accurate estimate of the cost of
Question:
Companies calculate overhead rates so that they can have a more accurate estimate of the cost of production. Manufacturing overhead is often a significant component of production cost. The following are calculations of overhead by a hypothetical company:
Rent on factory building………………………………………..…15,000.00
Wages paid to supervisors………………………………………...3,500.00
Utilities paid for factory………………………………………….....1,500.00
Wages paid to production workers……………………………….8,000.00
Dep. expense for production equipment……………………….10,000.00
Estimated number of hours of direct labor……………………...1,200.00
Required:
Calculate the overhead rate on the basis of the preceding information. Use direct labor hours as the cost driver.
Practical Management Science
ISBN: 978-1305250901
5th edition
Authors: Wayne L. Winston, Christian Albright