19. The manufacturing overhead budget at Latronica Corporation is based on budge

Question

19.

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 $7.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $139,160 per month, which includes depreciation of $24,860. 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:

$19.60

$27.20

$23.70

$7.60

19.

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 $7.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $139,160 per month, which includes depreciation of $24,860. 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

The predetermined overhead rate for August should be $23.70

calculated as follows:

predetermined overhead rate = Variable overhead rate + fixed manufacturing overhead rate

= $7.6 + (139160 - 24860) / 7100

= $7.6 + $ 16.10 = $23.70

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