Question

The following data pertains to activity and costs for two months: June July Activity level in units........... 10,000 12,000 Direct materials .................. $16,000 $ ? Fixed factory rent ............... 12,000 ? Manufacturing overhead .... 10,000 ? Total cost ........................... $38,000 $42,900 Assuming that these activity levels are within the relevant range, the manufacturing overhead for July was: A) $10,000 B) $11,700 C) $19,000 D) $9,300

Answer 1

B) $11,700

Step-by-step explanation:

The computation of the manufacturing overhead is shown below:

Total cost = Direct material + Fixed factory rent + Manufacturing overhead

where,

Direct material = July units × (direct material cost ÷ June units)

= 12,000 units × ($16,000 ÷ 10,000 units)

= $19,200

The other items values would remain the same.

Now put these values to the above formula

So, the value would equal to

$42,900 = $19,200 + $12,000 + Manufacturing overhead

$42,900 = $31,200 + Manufacturing overhead

So, manufacturing overhead = $11,700