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

Question

The manufacturing overhead budget at Pendley Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,500 direct labor-hours will be required in August. The variable overhead rate is $7.70 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $151,500 per month, which includes depreciation of $24,910. 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:

$7.70

$20.20

$27.90

$24.40

The manufacturing overhead budget at Pendley Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,500 direct labor-hours will be required in August. The variable overhead rate is $7.70 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $151,500 per month, which includes depreciation of $24,910. 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

$20.20 Budgeted fixed manufacturing overhead        151,500.00 Direct Labour hours             7,500.00 Predetermined O/H Rate =151,500/7500                   20.20

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