Compute the overhead application rate for total overhead

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Earth Company expects to operate at 70% of its productive capacity of 48,000 units per month. At this planned level, the company expects to use 24,000 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate based on direct labor hours. At the 70% capacity level, the total budgeted cost includes $57,600 fixed overhead cost and $271,200 variable overhead cost. In the current month, the company incurred $320,000 actual overhead and 26,696 actual labor hours while producing 37,600 units.

Compute its overhead application rate for total overhead

Reference no: EM13216092

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