The manufacturing overhead budget at Foshay Corporation is based on budgeted dir

Question

The manufacturing overhead budget at Foshay Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,200 direct labor-hours will be required in May. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $134,640 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 May should be:

Explanation / Answer

Predetermined overhead rate = Estimated Overhead / Estimated Activity

= 134,640/7,200 = 18.7

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