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Canoe Company's manufacturing accounting system uses direct labor costs to apply overhead to goods in process and finished goods inventories. Canoe Company's manufacturing costs for the year were: direct labor, $30,000; direct materials, $50,000; and factory overhead applied, $6,000. The plant-wide overhead application rate was:

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Answer:

Estimated manufacturing overhead rate= $0.2 per direct labor dollar

Explanation:

Giving the following information:

Direct labor, $30,000

Factory overhead applied $6,000.

To calculate the predetermined overhead rate, we need to use the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

6,000= Estimated manufacturing overhead rate*30,000

6,000 / 30,000 = Estimated manufacturing overhead rate

Estimated manufacturing overhead rate= $0.2 per direct labor dollar

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