Question

The manufacturing overhead budget at Levetron Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,700 direct labor-hours will be required in August. The variable overhead rate is $9.20 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $143,990 per month, which includes depreciation of $25,640. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for August should be:

Answer 1

$27.9

Step-by-step explanation:

Labor hours × Variable manufacturing over head rate

= 7,700 × $9.2

= $70,840

We will then add fixed manufacturing overhead to the above

= $143,990 + $70,840

= $214,830

The next step is to divided the above by the direct labor hour

= $214,830 / 7,700

= $27.9

Therefore the predetermined overhead rate for August is $27.9