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Horngren'S Financial And Managerial Accounting
Found in: Page 943

Short Answer

Young Foundry uses a predetermined overhead allocation rate to allocate overhead to individual jobs, based on the machine hours required. At the beginning of 2018, the company expected to incur the following:

Manufacturing overhead costs


Direct labor cost


Machine hours

70,000 hours

At the end of 2018, the company had actually incurred:

Direct labor cost


Depreciation on manufacturing plant and equipment


Property taxes on plant


Sales salaries


Delivery driver’s wages


Plant janitor’s wages


Machine hours

60,000 hours


1. Compute Young’s predetermined overhead allocation rate.

The predetermined overhead allocation rate is $12

See the step by step solution

Step by Step Solution

Step 1: Overhead allocation rate

Overhead allocation rate is computed to allocate the overhead cost based on the actual labor hout or actual labor cost of the company during the year.

Step 2: The predetermined overhead allocation rate per direct labor dollar.

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