A factory estimates overhead of Rs. 600,000 and 30,000 direct labour hours for the coming period. What predetermined overhead rate should it use per direct labour hour?
Correct answer: B. Rs. 20 per hour
- A. Rs. 15 per hour
- B. Rs. 20 per hour
- C. Rs. 30 per hour
- D. Rs. 50 per hour
Explanation
The predetermined overhead rate is estimated overhead divided by estimated activity. Rs. 600,000 divided by 30,000 direct labour hours gives Rs. 20 per hour.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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