Question

Smith Office Equipment​ Company's budgeted manufacturing overhead is $ 4 comma 500 comma 000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 60 comma 000. What is the manufacturing overhead​ rate?

Answer 1

$75

Step-by-step explanation:

We know,

Manufacturing overhead​ rate = Budgeted manufacturing overhead ÷ Budgeted direct labor hours

Given,

Budgeted manufacturing overhead = $4,500,000

Budgeted direct labor hours = 60,000

Putting the values into the manufacturing rate formula, we can get,

Manufacturing overhead​ rate = $4,500,000 ÷ 60,000 hours

Manufacturing overhead​ rate = $75 per labor hour.

When the standard amount of factory cost is allocated to the production of every unit, it is called the overhead manufacturing rate.