Correct Answer ----Predetermined overhead rate -$2.50
Explanation and calculations
|
Schedule of Predetermined Overhead
rate
|
|
Manufacturing Overheads
|
|
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Rent of Factory Building
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$ 15,000.00
|
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Depreciation on Factory Equipment
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$ 8,000.00
|
|
Indirect Labor
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$ 12,000.00
|
|
Production Supervisor's Salary
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$ 15,000.00
|
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(A) Total Estimated Overheads
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$ 50,000.00
|
|
(B) Total Direct labor hours in the year
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$ 20,000.00
|
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(A/B) Predetermined Overhead Rate per labor hour
|
$
2.50
|
Sales salary is a selling expense and not a product cost hence
it will not be included for calculating predetermined overhead
rate.
Direct material and labor are direct expenses, they are product
cost but not a part of Overhead cost.
