Cartier Inc. bases its manufacturing overhead budget on budgeted direct labor-ho

Question

Cartier Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $5.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $39,930 per month, which includes depreciation of $12,870. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 3,300 direct labor-hours will be required in April. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for April should be: $14.00 $5.80 $17.90 $12.10

Explanation / Answer

Fixed overhead rate = 39930/3300 = 12.10 per direct labour hour

Variable overhead rate = 5.80 per labour hour

Total predetermine overhead rate = 12.10+5.80 = 17.90 per labour hour

so answer is c) $17.90

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