Hamilton has budgeted total manufacturing overhead costs for the year as $125 000, based on 20 000 direct labour hours. The ratio of variable manufacturing overhead costs to fixed manufacturing overhead costs is 2:1. In a given month, 2000 direct labour hours are budgeted for production. How much overhead is budgeted?
A) $6250
B) $12 500
C) $18 750
D) $25 000

Question

Quizplus · Accepted Answer

The total manufacturing overhead costs are $125,000 for 20,000 direct labor hours, which means the overhead rate is $6.25 per direct labor hour ($125,000 / 20,000 hours). For 2,000 budgeted direct labor hours in a given month, the budgeted overhead is 2,000 hours * $6.25/hour = $12,500.

Hamilton Has Budgeted Total Manufacturing Overhead Costs for the Year