Answer :
Borden corporation budgets a total overhead cost of $2,187,000. Borden budgeted 135,000 direct labor hours. The overhead rate on budgeted direct labor hours would be $17 per hour.
Overhead Rate = Budgeted Overhead Cost / Budgeted Hours
Overhead Rate = $ 23,08,600 / 1,35,800 Hours i.e $ 17.00 Per Hour
So Overhead Rate = $ 17 Per hour
The overhead rate is the proportion of a company's overhead, such as its rent and other administrative costs, to its direct costs, sales, or other inputs like machine hours. It gives business owners and managers a sense of how much more expensive indirect costs are than, say, direct production costs or gross sales.
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Based on the provided information, the single plantwide overhead rate is $16.2 per unit.
The plantwide overhead rate refers to a single overhead rate that a company uses to allocate all of its manufacturing overhead costs to products or cost objects. It is generally used in smaller entities with simple cost structures. Plantwide overhead rate is calculated by dividing the total overhead by the total direct hours, hence
Plantwide overhead rate = Total overhead cost/ Direct labor hours
Based on the information provided, the total overhead cost is $2,187,000 and direct labor hours is 135,000. Hence
Plantwide overhead rate = 2187000/ 135000 =$16.2 per unit
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