EXERCISE 3–1 Compute the Predetermined Overhead Rate [LO1]
Logan Products computes its predetermined overhead rate annually on the basis of direct labor- hours. At the beginning of the year, it estimated that 40,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $466,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of
$3.00 per direct labor-hour. Logan’s actual manufacturing overhead for the year was $713,400 and its actual total direct labor was 41,000 hours.
Compute the company’s predetermined overhead rate for the year.