The manufacturing overhead budget at Latronica Corporation is based on budgeted
ID: 2374481 • Letter: T
Question
The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in August. The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $132,770 per month, which includes depreciation of $24,850. 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:
Explanation / Answer
Predetermined overhead rate = Variable overhead rate + Fixed overhead rate= $ 8.60 + ($ 132,770 / 7,100)
= $ 8.60 + 18.7
= $ 27.30
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