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Goldie Gold Jewelry uses direct labor hours to apply overhead and estimated total overhead costs at $52,500 and direct labor hours at 12,500 for the second quarter. The direct labor quantity standard is 1.75 direct labor hours per unit, and the company produced 5,250 units in the second month of the second quarter. This required 2,625 direct labor hours. What was the overhead rate for the second quarter?

Sagot :

Martebiidn

In the case above, the value of the overhead rate for the second quarter is $17,640.

What is the overhead rate about?

Note that:

In the case above, for one to be able to calculate the predetermined overhead rate, a person need to divide the value of the  estimated overhead costs which is $52,500 by that of the estimated direct labor hours .

Predetermined overhead rate=Estimated overhead costs/ estimated direct labor hours

Predetermined overhead rate=$52,500/  12,500

Predetermined overhead rate=$4.20/DLH overhead rate

Hence:  $52,500/ 12,500 =   $4.20/DLH overhead rate.

Since the Overhead that was applied at standard hours was said to be allowed, then:

= $4.2 x 2,400 x 1.75

= $17,640.

Therefore, In the case above, the value of the overhead rate for the second quarter is $17,640.

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