K Company estimates that overhead costs for the next year will amount to $6,520,000 for indirect labor and $1,200,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. With 160,000 direct labor hours planned for the next year, what is the company's plantwide overhead rate? Options are: - $0.13 per direct labor hour - $7.50 per direct labor hour - $40.75 per direct labor hour - $48.25 per direct labor hour - $0.27 per direct labor hour To calculate the plantwide overhead rate, sum the indirect labor and factory utilities, then divide by the total direct labor hours: Total Overhead Costs = Indirect Labor + Factory Utilities Total Overhead Costs = $6,520,000 + $1,200,000 Total Overhead Costs = $7,720,000 Plantwide Overhead Rate = Total Overhead Costs / Total Direct Labor Hours Plantwide Overhead Rate = $7,720,000 / 160,000 hours Plantwide Overhead Rate = $48.25 per direct labor hour Therefore, the plantwide overhead rate is $48.25 per direct labor hour.
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To calculate the plantwide overhead rate, you need to follow these steps:
1. Sum up all the estimated overhead costs. 2. Divide the total overhead costs by the total number of direct labor hours planned for the year.
According to the data provided:
Total estimated overhead costs = indirect labor costs + factory utilities costs Total estimated overhead costs = $6,520,000 (for indirect labor) + $1,200,000 (for factory utilities) Total estimated overhead costs = $7,720,000
Now, we have the planned direct labor hours for the year, which is: Direct labor hours = 160,000 hours
Finally, to get the plantwide overhead rate, divide the total estimated overhead costs by the total direct labor hours: Plantwide overhead rate = Total estimated overhead costs / Direct labor hours Plantwide overhead rate = $7,720,000 / 160,000 hours Plantwide overhead rate = $48.25 per direct labor hour
Therefore, the correct answer is $48.25 per direct labor hour.