The manufacturing overhead budget at Latronica Corporation is based on budgeted

Question

The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 6,900 direct labor-hours will be required in August. The variable overhead rate is $7.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $138.690 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 August should be:

Explanation / Answer

Solution:

Predetermined overhead rate = Variable overhead rate + Fixed overhead rate

= $ 7.40 + ($ 138,690 / 6,900)

= $ 7.40 + 20.1

= $ 27.5

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