Question
Kay Company budgets overhead cost of $4,970,000 for the next year. The company uses direct labor hours as its overhead allocation base.
Kay Company budgets overhead cost of $4,970,000 for the next year. The company uses direct labor hours as its overhead allocation base. If 140,000 direct labor hours are planned for the next year, what is the company's plantwide overhead rate?
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Koala Tutor
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The plantwide overhead rate is calculated by dividing the total budgeted overhead cost by the total direct labor hours.
So, $4,970,000 / 140,000 hours = $35.50 per hour.
Therefore, the company's plantwide overhead rate is $35.50 per hour.
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