The company’s plantwide predetermined overhead rate was $5.50 per direct labor hour. This rate was used to allocate overhead costs to production departments based on the number of direct labor hours worked in each department. The predetermined overhead rate was determined by dividing the estimated total overhead costs for the upcoming year by the estimated total direct labor hours for the upcoming year.
The company’s actual overhead costs for the year were $209000. The actual direct labor hours worked during the year were 38000.
The company’s overhead cost per direct labor hour for the year was $5.50.
What was the company’s plantwide predetermined overhead rate?
The company’s plantwide predetermined overhead rate was 150%.
How was the company’s plantwide predetermined overhead rate determined?
The company’s plantwide predetermined overhead rate was based on the total estimated overhead costs for the year divided by the total estimated amount of production for the year.
What factors influenced the company’s plantwide predetermined overhead rate?
The company’s plantwide predetermined overhead rate was influenced by the total estimated overhead costs for the year and the total estimated amount of production for the year.
How might the company’s plantwide predetermined overhead rate change in the future?
The company’s plantwide predetermined overhead rate might change in the future based on changes in the total estimated overhead costs for the year or the total estimated amount of production for the year.
Why is it important for the company to have a plantwide predetermined overhead rate?
The company’s plantwide predetermined overhead rate is important because it provides a basis for allocating overhead costs to production.
How do overhead costs get allocated to production?
Overhead costs are allocated to production based on the plantwide predetermined overhead rate.
How does the plantwide predetermined overhead rate impact the cost of production?
The plantwide predetermined overhead rate impacts the cost of production by assigning a portion of the overhead costs to each unit produced.
How does the plantwide predetermined overhead rate impact the selling price of products?
The plantwide predetermined overhead rate impacts the selling price of products by raising the cost of production which in turn raises the selling price.
What are the implications of a high plantwide predetermined overhead rate?
A high plantwide predetermined overhead rate means that a large portion of overhead costs will be allocated to each unit of production which will in turn increase the selling price of the product.
What are the implications of a low plantwide predetermined overhead rate?
A low plantwide predetermined overhead rate means that a small portion of overhead costs will be allocated to each unit of production which will keep the selling price of the product low.
Is there an optimal plantwide predetermined overhead rate?
There is no such thing as an optimal plantwide predetermined overhead rate because it depends on the specific circumstances of the company.
How can the company’s plantwide predetermined overhead rate be improved?
The company’s plantwide predetermined overhead rate can be improved by reducing the total estimated overhead costs for the year or by increasing the total estimated amount of production for the year.
What are the risks associated with a high plantwide predetermined overhead rate?
The risks associated with a high plantwide predetermined overhead rate include the possibility of over-allocating overhead costs to production and the potential for pricing products too high.
What are the risks associated with a low plantwide predetermined overhead rate?
The risks associated with a low plantwide predetermined overhead rate include the possibility of under-allocating overhead costs to production and the potential for pricing products too low.
What are some possible methods for reducing the total estimated overhead costs for the year?
Some possible methods for reducing the total estimated overhead costs for the year include reducing the number of employees using more efficient production methods and negotiating lower prices with suppliers.
