Collins Inc applies overhead using direct labor hours. The following data are available for the year: Estimated direct labor hours 1,050,000 Actual direct labor hours 1,000,000 Overhead applied $5,000,000 Actual overhead $4,850,000 What predetermined overhead rate did Collins use?
Predetermined overhead rate used by Collins is $5.00 per direct labor hour calculated as follows:
Overhead applied = Actual cost driver units x Predetermined overhead rate
$5,000,000 = 1,000,000 x Predetermined overhead rate
Predetermined overhead rate = $5.00
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