Ana Carillo and Associates is a medium-sized company located near a large metropolitan area in the Midwest. The company manufactures cabinets of mahogany, oak, and other fine woods for use in expensive homes, restaurants, and hotels. Although some of the work is custom, many of the cabinets are a standard size. One such non-custom model is called Luxury Base Frame. Normal production is 1,000 units. Each unit has a direct labor hour standard of 5 hours. Overhead is applied to production based on standard direct labor hours. During the most recent month, only 830 units were produced; 4,500 direct labor hours were allowed for standard production, but only 4,000 hours were used. Standard and actual overhead costs were as follows.

Standard (1,000 units) Actual (830 units)

Indirect materials $ 11,100 $ 11,400

Indirect labor 39,800 47,200

(Fixed) Manufacturing supervisors salaries 20,800 20,400

(Fixed) Manufacturing office employees salaries 12,000 11,600

(Fixed) Engineering costs 25,000 23,100

Computer costs 9,300 9,300

Electricity 2,300 2,300

(Fixed) Manufacturing building depreciation 7,400 7,400

(Fixed) Machinery depreciation 2,800 2,800

(Fixed) Trucks and forklift depreciation 1,400 1,400

Small tools 700 1,300

(Fixed) Insurance 500 500

(Fixed) Property taxes 300 300

Total $133,400 $139,000

Determine the overhead application rate. (Round answer to 2 decimal places, e.g. 15.75.)

Overhead application rate $________ per direct labor hour

How do you determine the overhead application rate?