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How to calculate the overhead rate per hour of Unilever?

Unilever Depot, Inc. had the following estimated costs for next year:

Sales commissions
$600,000
Direct labor
440,000
Salary of production supervisor
280,000
Rent on factory equipment
128,000
Direct materials
120,000
Advertising expense
 88,000
Indirect materials
40,000

The company estimates that 64,000 direct labor hours will be worked and 80,000 machine hours will be incurred during the year.

If overhead is applied on the basis of direct labor hours, what will be the overhead rate per hour? 


If overhead is applied on the basis of direct labor hours, the predetermined overhead rate would be calculated as follows:

Indirect materials
 $     40,000
Rent on factory equipment
   128,000
Salary of production supervisor
     280,000
Estimated manufacturing overhead costs
  448,000
Estimated direct labor hours
    ¸ 64,000
Predetermined overhead rate
$7.00/DLH

                   Note that direct materials and direct labor are product costs but are not a part of manufacturing overhead costs, which only include indirect factory costs. Sales commissions and advertising expenses would be considered a part of selling and administrative expenses, and are thus period rather than product costs.
 

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