Longobardi Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 33,500 labor-hours. The estimated variable manufacturing overhead was $6.37 per labor-hour and the estimated total fixed manufacturing overhead was $850,900. The actual labor-hours for the year turned out to be 30,100 labor-hours. The predetermined overhead rate for the recently completed year was closest to:

To find the predetermined overhead rate, we use the formula:

\[
\text{Predetermined overhead rate} = \frac{\text{Estimated total manufacturing overhead}}{\text{Estimated total labor-hours}}
\]

Where:

1. **Estimated total manufacturing overhead** is the sum of estimated fixed and variable overhead costs.
2. **Estimated total labor-hours** is the estimated number of labor-hours for the year.

### Step 1: Calculate the estimated total variable manufacturing overhead
\[
\text{Estimated total variable overhead} = \text{Estimated labor-hours} \times \text{Variable overhead rate per hour}
\]
\[
\text{Estimated total variable overhead} = 33,500 \times 6.37 = 213,395
\]

### Step 2: Calculate the estimated total manufacturing overhead
\[
\text{Estimated total manufacturing overhead} = \text{Estimated total fixed overhead} + \text{Estimated total variable overhead}
\]
\[
\text{Estimated total manufacturing overhead} = 850,900 + 213,395 = 1,064,295
\]

### Step 3: Calculate the predetermined overhead rate
\[
\text{Predetermined overhead rate} = \frac{1,064,295}{33,500} \approx 31.77
\]

Thus, the predetermined overhead rate for the year was closest to **$31.77 per labor-hour**.

Would you like to go over this in more detail or have any other questions?

Here are 5 related questions to explore further:
1. How does a company typically decide on estimated labor hours?
2. What is the significance of a predetermined overhead rate in cost accounting?
3. How does actual labor-hour variation affect overhead application?
4. Can a company revise its predetermined overhead rate mid-year?
5. What are the potential impacts of under- or over-applied overhead?

**Tip:** Always review your estimates throughout the year to ensure your actual costs align with your predetermined overhead rates, minimizing discrepancies.

Learn how to calculate the predetermined overhead rate for Longobardi Corporation using cost accounting principles. This problem involves estimating labor-hours, variable manufacturing overhead, and fixed manufacturing overhead to find the overhead rate per labor-hour, suitable for undergraduate accounting students.

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