Nasara Manufacturing Plc has three direct labour employees that work 40 hours each a week for 50 weeks a year. Factory overhead costs of ₦60,000 is distribu...
Question 1 Report
Nasara Manufacturing Plc has three direct labour employees that work 40 hours each a week for 50 weeks a year. Factory overhead costs of ₦60,000 is distributed on the basis of direct labour hours.
Compute the overhead rate?
Answer Details
To compute the overhead rate, we need to first determine the total number of direct labour hours worked by the three employees in a year.
Direct labour hours = number of employees x number of hours worked per week x number of weeks in a year
Direct labour hours = 3 x 40 x 50 = 6,000 hours
Next, we divide the total factory overhead costs by the total direct labour hours to get the overhead rate per hour.
Overhead rate = Factory overhead costs / Direct labour hours
Overhead rate = ₦60,000 / 6,000 hours = ₦10 per hour
Therefore, the overhead rate for Nasara Manufacturing Plc is ₦10 per hour. Option (C) is the correct answer.
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