K company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utiliti

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K company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utiliti

es. the company uses direct labor hours as its overhead allocation base. if 80,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?

Business

1 answer:

Scilla [3.8K] · Answer 1 · 2026-04-04T19:30:58+03:00

To calculate the overhead rate, we need to derive the ratio of total indirect costs to direct labor costs. Overhead rate = Indirect Cost / Direct labor cost. Total estimated overhead costs are calculated as $2,900,000 + $800,000, amounting to $3,700,000. Thus, the overhead rate is $3,700,000 divided by $80,000, yielding an overhead rate of 46.25. Consequently, the overhead rate for K company is 46.25.