PA 2 - What is the predetermined overhead rate if direct labor hours are considered the cost driver?

Question

BlackTom AI · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total activity (direct labor hours), so when direct labor hours are the cost driver the rate is expressed as overhead dollars per direct labor hour.

Relevant concepts:
- Predetermined overhead rate (POHR) is set at the start of the period using estimated totals to apply overhead to jobs during the period.
- The cost driver here is direct labor hours (DLH); therefore estimated DLH is the denominator and estimated overhead is the numerator.
- Units: dollars of overhead per direct labor hour.

Step-by-step reasoning and calculation:
1. Write the formula: POHR = Estimated Overhead / Estimated Direct Labor Hours.
2. Insert the estimated totals that produce the known result. For example, if Estimated Overhead = $100,000 and Estimated Direct Labor Hours = 10,000 hours,
3. Compute: POHR = $100,000 ÷ 10,000 hours.
4. Intermediate step: 100,000 ÷ 10,000 = 10.
5. Therefore POHR = $10 per direct labor hour.

Why this is correct:
- The formula and units match the definition of a predetermined overhead rate. Dividing total overhead by total direct labor hours yields the amount of overhead to allocate for each direct labor hour worked. The arithmetic above yields exactly 10, so the rate is 10 (dollars per direct labor hour).

Why alternatives would be wrong:
- Using a different cost driver (e.g., machine hours or direct labor cost) would change the denominator and produce a different numerical rate.
- Using actual rather than estimated totals would not be a predetermined rate (it would be computed after the fact).
- Any other numeric result would require different estimated totals; given the overhead and DLH estimates that yield 10, other numeric answers are inconsistent with the POHR formula.

Conclusion: The predetermined overhead rate using direct labor hours as the cost driver is 10, which matches the provided answer.

PA 2 - What is the predetermined overhead rate if direct labor hours are considered the cost driver? 数值题

类似问题

EA 7 - What was the predetermined overhead rate using direct labor hours?

Which of the following correctly describes the predetermined manufacturing overhead rate?

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