An electric device delivers a current of [tex]$15.0 A$[/tex] for 30 seconds. How many electrons flow through it?
Answer (1)
Calculate the total direct labor costs: $50,000 + $100,000 = $150,000.
Divide the total overhead costs by the total direct labor costs: 150 , 000 312 , 000 = 2.08 .
Multiply by 100 to express as a percentage: 2.08 × 100 = 208 .
The predetermined overhead rate is 208 % of direct labor cost.
Explanation
Calculate Total Direct Labor Costs First, we need to calculate the total direct labor costs. We sum the direct labor costs for both Standard and Custom handbags.
Sum Direct Labor Costs The direct labor cost for Standard handbags is $50,000, and for Custom handbags, it's $100,000. So, the total direct labor cost is: 50 , 000 + 100 , 000 = 150 , 000
Calculate Overhead Rate Next, we calculate the plantwide overhead rate. This is done by dividing the total estimated overhead costs by the total direct labor costs and then multiplying by 100 to express the result as a percentage.
Compute the Percentage The total estimated overhead costs are $312,000. Therefore, the overhead rate is calculated as follows: 150 , 000 312 , 000 × 100 = 208
Round the Result Finally, we round the overhead rate to 0 decimal places, as requested. The overhead rate is 208.0, which rounds to 208.
State the Final Answer Therefore, the predetermined overhead rate is 208% of direct labor cost.
Examples
Understanding overhead rates is crucial in business for pricing and profitability analysis. For instance, if a small bakery wants to determine the cost of making a cake, they need to account for not only the direct costs like ingredients and labor but also indirect costs like rent, utilities, and equipment maintenance. By calculating an overhead rate based on direct labor costs, the bakery can allocate these indirect costs to each cake, ensuring accurate pricing and understanding the true cost of production. This helps in making informed decisions about pricing, cost control, and overall business strategy.
