Companies calculate overhead rates so that they can have a

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.


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