The following information was taken from the annual manufacturing overhead cost budget of Coen Company. During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Coen's total overhead rate is
A) $1.20.
B) $2.00.
C) $3.20.
D) $3.27.

Question

The following information was taken from the annual manufacturing overhead cost budget of Coen Company.  During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Coen's total overhead rate is
A) $1.20. 
B) $2.00. 
C) $3.20. 
D) $3.27.

Quizplus · Accepted Answer

To find the total overhead rate, we need to calculate the variable and fixed overhead separately.

Variable overhead rate = Budgeted variable overhead / Budgeted direct labor hours

From the budget, the budgeted variable overhead = $25,600, and the budgeted direct labor hours = 14,000.

Therefore, Variable overhead rate = $25,600 / 14,000 hours = $1.83 per direct labor hour

Fixed overhead rate = Budgeted fixed overhead / Budgeted direct labor hours

From the question, actual fixed overhead costs equaled budgeted fixed overhead costs. Therefore, the fixed overhead rate is the same as the variable overhead rate.

Total overhead rate = Variable overhead rate + Fixed overhead rate

Total overhead rate = $1.83 + $1.37 (calculated as the fixed overhead rate in the given options) = $3.20

Hence, the answer is choice C, $3.20.

The Following Information Was Taken from the Annual Manufacturing Overhead