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Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of...

Question:

Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information.

Estimated wheels produced: Car; 40,240, Truck; 15,000.

Direct labor hours per wheel: Car; 1, Truck; 3.

Total estimated overhead costs for the two product lines are $853,560.

Calculate overhead rate. (Round answer to 2 decimal places, e.g. $12.25.)

Overhead:

Overhead cost represents indirect costs that are incurred during a production process, which include both actual costs and budgeted costs. The overhead rate measures per unit cost of overhead for a given allocation measure, which could be physical units or total direct costs.

Answer and Explanation: 1

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Overhead rate is computed as follows:

  • overhead rate = total overhead cost / allocation measure

In this question, one way to construct the allocation...

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Manufacturing Overhead: Definition, Formula & Examples

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Chapter 22 / Lesson 35
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Learn about manufacturing overhead. Understand what overhead is, learn the manufacturing overhead formula, and see how to calculate manufacturing overhead.


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