Nadal Company is debating the use of direct labor cost or direct labor hours as the cost allocation
base for allocating manufacturing overhead. The following information is available for the most recent
year:
Actual direct labor hours 232,000
Estimated direct labor hours 250,000
Actual manufacturing overhead costs $350,000
Estimated manufacturing overhead costs $400,000
Actual direct labor cost $465,000
Estimated direct labor cost $500,000
If Nadal Company uses direct labor cost as the allocation base, what would the predetermined
manufacturing overhead rate be?
A) 80%
B) 70%
C) 75%
D) 86%
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