Privack Corporation has a standard cost system in which it applies overhead to products based on...

Question:

Privack Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:

Variable overhead cost per direct labor-hour $2.00
Total fixed overhead cost per year $250,000
Budgeted standard direct labor-hours (denominator level of activity) 40,000
Actual direct labor-hours 39,000
Standard direct labor-hours allowed for the actual output 38,000

Required

1. Compute the predetermined overhead rate for the year. (Round Predetermined overhead rate to 2 decimal places.)

Total fixed overhead cost per year _____
Total variable overhead cost _____
Total overhead cost at the denominator level of activity _____
Budgeted standard direct labor-hours _____
Predetermined overhead rate _____

2. Determine the amount of overhead that would be applied to the output of the period. (Round Predetermined overhead rate to 2 decimal places.)

Standard direct labor-hours allowed for the actual output _____
Predetermined overhead rate _____
Overhead applied _____

Predetermined overhead rate

The predetermined overhead rate is the predetermined amount of overhead cost that will be applied to each unit of production based on its consumption of the cost driver for the period.

Answer and Explanation:


1.) The predetermined rate is:

Total fixed overhead cost per year $250,000
Total variable overhead cost 80,000 ($2.00 x 40,000 hours)
Total...

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Under- or Over-Applied Manufacturing Overhead

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