A furniture corporation manufactures two models of furniture—Standard and Deluxe. The total estimated manufacturing overhead costs are $64,250. The following estimates are available:
The company uses direct labor costs as the base to allocate manufacturing overhead. Calculate the predetermined overhead rate. (Round your answer to two decimal places.)
A) 27.87%
B) 29.20%
C) 18.36%
D) 56.98%
D) 56.98%
Explanation: Total direct labor cost = ($115 × 250 units) + ($140 × 600 units) = $112,750
Predetermined overhead allocation rate = $64,250 / $112,750 = 56.98% of direct labor costs
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