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Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:

Activity Cost Pool Estimated Overhead Cost Expected Activity
Labor-related $52,000 8,000 direct labor-hours
Machine-related $15,000 20,000 machine-hours
Machine setups $42,000 1,000 setups
Production orders $18,000 500 orders
Product testing $48,000 2,000 tests
Packaging $75,000 5,000 packages
General factory $108,800 8,000 direct labor-hours

Required:
Compute the company's pre-determined overhead rate, assuming that the company uses a Single plantwide predetermined overhead rate based on direct labor-hours.

Sagot :

Zviko

Answer:

$48.23 per direct labor hour

Explanation :

Pre-determined overhead rate = Budgeted Overheads ÷ Budgeted Activity

where,

Budgeted Overheads = $52,000 + $15,000 + $42,000 +  $18,000 + $48,000 + $75,000 + $108,800 = $358,800

Budgeted Activity (direct labor-hours) = 8,000 hours

therefore,

Pre-determined overhead rate = $358,800 ÷ 8,000 hours = $48.23 per direct labor hour

The company's pre-determined overhead rate, assuming that the company uses a Single plantwide predetermined overhead rate based on direct labor-hours is $48.23 per direct labor hour.

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