K Company Estimates That Overhead Costs for the Next Year

question 91

Multiple Choice

K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities.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?

• A)$0.02 per direct labor hour.
• B)$46.25 per direct labor hour.
• C)$36.25 per direct labor hour.
• D)$10 per direct labor hour.
• E)$0.10 per direct labor hour.

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Definitions:

Rate

The price or fee for goods or services, or the ratio between two amounts showing the cost of one in terms of the other, often used in context with interest and exchange rates.

Hours

A measure of time typically used to quantify the duration of activities or operations.

Factory Overhead Cost Variance

The difference between the actual and budgeted indirect manufacturing costs.

Fixed Overhead

Costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance.