The manufacturing overhead budget at Mahapatra Corporation is based on budgeted

Question

The manufacturing overhead budget at Mahapatra Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,000 direct labor-hours will be required in May. The variable overhead rate is $8.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $102,900 per month, which includes depreciation of $18,050. 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:

The manufacturing overhead budget at Mahapatra Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,000 direct labor-hours will be required in May. The variable overhead rate is $8.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $102,900 per month, which includes depreciation of $18,050. All other fixed manufacturing overhead costs represent current cash flows.

Explanation / Answer

The predetermined overhead rate for May=7,000 direct labor-hours*$8.80 per direct labor-hour.+ fixed manufacturing overhead is $102,900 per month-depreciation of $18,050/ 7,000 direct labor-hours =$20.92 per direct labor hour.

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