The following information was taken from the annual manufacturing overhead cost

Question

The following information was taken from the annual manufacturing overhead cost budget of Fergie Manufacturing. Variable manufacturing overhead costs $92,400 Fixed manufacturing overhead costs $55,440 Normal production level in labor hours 30,800 Normal production level in units 5,775 Standard labor hours per unit 4
During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie's total overhead rate is                                A.            $6.53.                             B.            $6.40.                             C.            $2.40.                             D.            $4.00. The following information was taken from the annual manufacturing overhead cost budget of Fergie Manufacturing. Variable manufacturing overhead costs $92,400 Fixed manufacturing overhead costs $55,440 Normal production level in labor hours 30,800 Normal production level in units 5,775 Standard labor hours per unit 4
During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie's total overhead rate is Variable manufacturing overhead costs $92,400 Fixed manufacturing overhead costs $55,440 Normal production level in labor hours 30,800 Normal production level in units 5,775 Standard labor hours per unit 4
During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie's total overhead rate is $6.53. $6.40. $2.40. $4.00. Variable manufacturing overhead costs $92,400 Fixed manufacturing overhead costs $55,440 Normal production level in labor hours 30,800 Normal production level in units 5,775 Standard labor hours per unit 4

Explanation / Answer

Hi,

Please find the answer as follows;

Total Standard Overheads = 92400 + 55440 = 147840

Total Standard Labor Hours = 5775*4 = 23100

Total Overhead Rate = Total Standard Overheads/Total Standard Labor Hours = 147840/23100 = 6.4

Option B (6.4) is correct.

Thanks.

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