Accounting for Decision Making and Control 6th Edition by Jerold Zimmerman

Exercise 10

The Bartolotta Company had an overabsorbed overhead balance at year-end. The firm wrote off one-third of it to Cost of Goods Sold, thereby raising net income by $100,000, and the remainder was charged to inventory accounts. Overhead is allocated to products using direct labor dollars.
The firm uses a flexible budget to calculate its overhead rate. Before the year began, the variable overhead rate and budgeted volume were estimated to be $7.00 per direct labor dollar and $1 million, respectively. Actual overhead incurred for the year was $9.7 million, and actual direct labor cost was $1,250,000. What budgeted fixed overhead amount did the Bartolotta Company use in calculating the overhead rate