Q: Calculate a company's predetermined overhead rate on the basis of direct labor hours.

The Orville Smith Company, a small manufacturer, uses a job-costing system to measure and track product costs for its line of specialty outdoor clothing and uses normal costing to allocate overhead costs to its products. For the coming year, Kristin George, the company's controller, estimates total overhead costs to be $100,000. Production manager Portia Kabler told Kristin that her best estimate for total production time for the year is 20,000 hours. Production data for the first quarter of the year is as follows:

Parkas Shirts Pants Shoes

Direct Materials used: 16,000 12,000 9,500 11,500

Direct Labor Cost: 13,000 10,000 7,000 9,500

Direct Labor hours: 1500 1250 850 950