# Quick Accounting Question

#### wrexsoul

So, I got this question wrong on an online accounting quiz.

Lana, Inc., a manufacturing business, estimated the following for Year 1:

Indirect materials: \$40,000
Indirect labor: \$15,000
Building Rent (1/4 of the building is for non-factory administrative offices): \$60,000
Depreciation on production equipment: \$20,000
Machine hours: 20,000 hours
Direct labor hours: 40,000 hours
Actual data for Year 1 are as follows:

Machine hours: 18,000 hours
Direct labor hours: 35,000 hours

The manufacturing overhead rate is determined on the basis of direct labor hours. Using the data above, what is the predetermined manufacturing overhead rate?

The answer is supposedly 3. I couldn't figure out how they got that answer. Can anyone help me out?

#### Keyur Desai

Estimated O/h = Sum of
Indirect materials: \$40,000
Indirect labor: \$15,000
Rent only 3/4 of \$60000 = \$45000
Depreciation on production equipment: \$20,000
Total = \$120000 (a)

Estimated D.Labour Hrs = 40000 hours (b)

Pre-determined rate = (a) / (b) = \$3 per l.hour

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