Companies calculate overhead rates so that they can have a more accurate estimate of the cost of...

Question:

Companies calculate overhead rates so that they can have a more accurate estimate of the cost of production. Manufacturing overhead is often a significant component of production cost. The following are calculations of overhead by a hypothetical company:

Rent on factory building 15,000.00

Wages paid to supervisors 3,500.00

utilities paid for factory 1,500.00

Wages paid to production workers 8,000.00

Dep expense for production equipment 10,000.00

Estimated number of hours of direct labor 1,200.00

Calculate the overhead rate on the basis of the preceding information. Use direct labor hours as the cost driver.

Overhead Cost:

Manufacturing overhead is a product cost. Its difference from direct labor and direct materials is it is an indirect product cost because it is incurred indirectly to the production.

Answer and Explanation: 1

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Calculate the total overhead costs.

  • Total overhead costs = Rent on factory + Wages paid to supervisors + Utilities for factory + Wages + Depreciation...

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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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