Companies calculate overhead rates so that they can have a more accurate estimate of the cost of production. Manufacturing overhead is often a significant component of production cost. The following are calculations of overhead by a hypothetical company: Rent on factory building 15,000.00 Wages paid to supervisiors 3,500.00 utilities paid for factory 1,500.00 Wages paid to production workers 8,000.00 Dep expense for production equipment 10,000.00 Estimated number of hours of direct labor 1,200.00
Calculate the overhead rate on the basis of the preceding information. Use direct labor hours as the cost driver.