Golebiewski Inc. bases its manufacturing overhead budget on budgeted direct labo

Question

Golebiewski Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 4,900 direct labor-hours will be required in November. The variable overhead rate is $8.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $78,400 per month, which includes depreciation of $10,290. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for November should be:

Explanation / Answer

The predetermined overhead rate for November=4,900 direct labor-hours*variable overhead rate is $8.40 per direct labor-hour+budgeted fixed manufacturing overhead is $78,400 per month- depreciation of $10,290=$109,270/4,900=$22.3 per direct labor hour.

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