The manufacturing overhead budget at Cardera Corporation is based on budgeted di

Question

The manufacturing overhead budget at Cardera Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 9,500 direct labor-hours will be required in January. The variable overhead rate is $8.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $131,100 per month, which includes depreciation of $18,160. All other fixed manufacturing overhead costs represent current cash flows.

The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for January should be:

$20.00 per direct labor-hour

$13.80 per direct labor-hour

$22.30 per direct labor-hour

$8.50 per direct labor-hour

The manufacturing overhead budget at Cardera Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 9,500 direct labor-hours will be required in January. The variable overhead rate is $8.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $131,100 per month, which includes depreciation of $18,160. All other fixed manufacturing overhead costs represent current cash flows.

Explanation / Answer

Fixed Overhead Excluding Depreciation = 131100/9500 = $ 13.80 per hour

Variable overhead = 8.5 per direct labour hour

Predetermined overhead rate is $ 13.80+8.5 = $ 22.30 per direct labour hour

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