Concept explainers
The Santos Shirt Company manufactures shirts in two departments: Cutting and Sewing. The company allocates manufacturing
Compute the predetermined overhead allocation rate.
Calculate predetermined overhead allocation rate for Company S.
Explanation of Solution
Predetermined Overhead Rate: Predetermined overhead rate is a measure used to allocate the estimated manufacturing overhead cost to the products or job orders during a particular period. This is generally evaluated at the beginning of each reporting period. The evaluation takes into account the estimated manufacturing overhead cost and the estimated allocation base that includes direct labor hours, direct labor in dollars, machine hours and direct materials.
Calculate predetermined overhead allocation rate.
Therefore, predetermined overhead allocation rate is $2.50 per direct labor hour.
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