Austin Company uses a job order cost accounting system. The company's executives estimated that direct labor would be $2,000,000 (200,000 hours at $10/hour) and that factory overhead would be $1,500,000 for the current period. At the end of the period, the records show that there had been 180,000 hours of direct labor and $1,200,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead allocation rate?

A) $6.00 per direct labor hour.
B) $7.50 per direct labor hour.
C) $6.67 per direct labor hour.
D) $8.33 per direct labor hour.
E) $7.08 per direct labor hour.

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Compute predetermined overhead allocation rate as follow... View the full answer