Barrick Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Total budgeted costs at 200,000 direct labour-hours are as follows$\text { Variable costs (total): }$
$\begin{array}{ll}
\text { Packing supplies } & £ 120,000 \
\text { Indirect labour } & £ 180,000 \
\text { Fixed costs (total): } & \
\text { Utilities } & £ 100,000 \
\text { Rent } & £ 40,000 \
\text { Insurance } & £ 20,000
\end{array}$
-The flexible budget for factory overhead would show that the variable factory overhead cost per direct labour-hour is

Question

Barrick Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Total budgeted costs at 200,000 direct labour-hours are as follows$\text { Variable costs (total): }$
$\begin{array}{ll}
\text { Packing supplies } & £ 120,000 \
\text { Indirect labour } & £ 180,000 \
\text { Fixed costs (total): } & \
\text { Utilities } & £ 100,000 \
\text { Rent } & £ 40,000 \
\text { Insurance } & £ 20,000
\end{array}$ 
-The flexible budget for factory overhead would show that the variable factory overhead cost per direct labour-hour is

Quizplus · Accepted Answer

To determine the variable factory overhead cost per direct labour-hour, we need to divide the total budgeted variable factory overhead costs by the total budgeted direct labour-hours.

Total budgeted variable factory overhead costs = £300,000 (from the table)
Total budgeted direct labour-hours = 200,000 (given in the question)

Variable factory overhead cost per direct labour-hour = Total budgeted variable factory overhead costs / Total budgeted direct labour-hours 
= £300,000 / 200,000
= £1.50 per direct labour-hour

Therefore, the variable factory overhead cost per direct labour-hour is £1.50, which corresponds to choice B.

Barrick Company Has Established a Flexible Budget for Manufacturing Overhead Variable costs (total): \text { Variable costs (total): } Variable costs (total):

Barrick Company Has Established a Flexible Budget for Manufacturing Overhead $\text { Variable costs (total): }$