Johansen Company Uses a Predetermined Overhead Rate Based on Direct

Multiple Choice

Johansen Company uses a predetermined overhead rate based on direct Labour hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for the next year: $\begin{array}{lrr} \text { Direct materials } &£ 6,000 \\ \text { Direct Labour.} &20,000\\ \text { Rent on factory building. } &15,000\\ \text { Sales salaries } &25,000\\ \text { Depreciation on factory equipment.} &8,000\\ \text { Indirect Labour } &12,000\\\text { Production supervisor's salary } &15,000 \end{array}$


Johansen estimates that 20,000 direct Labour hours will be worked during the year. The predetermined overhead rate per hour will be:

A) £2.50.
B) £3.50.
C) £3.75.
D) £5.05.