Question

The manufacturing overhead budget at Foshay Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,200 direct labor-hours will be required in May. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $134,640 per month, which includes depreciation of $24,880. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for May should be:

Answer 1

The predetermined overhead rate for May should be: $18.70 per direct labor hour

Step-by-step explanation:

Predetermined Overhead rate is the rate that is used to allocate Overheads to Departments or Jobs.

Predetermined Overhead rate = Budgeted Overheads / Budgeted Activity

= $134,640/7,200

= $18.70 per direct labor hour