DR Inc. bases its manufacturing overhead budget on budgeted direct labor-hours.

Question

DR Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 3,700 direct labor-hours will be required in September. The variable overhead rate is $5.70 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $48,100 per month, which includes depreciation of $5,550. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for September should be:

A. $5.70

B. $13.00

C. $18.70

D. $17.20

Explanation / Answer

The predetermined overhead rate for September=3,700*5.70)+48,100-5,550=$63,640/3,700=$17.20

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