The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $75,000 per month, of which $15,000 is factory depreciation.If the budgeted direct labor time for December is 8,000 hours, then average budgeted manufacturing overhead per direct labor-hour is closest to:

Question

Quizplus · Accepted Answer

The average budgeted manufacturing overhead per direct labor-hour is calculated by dividing the total budgeted manufacturing overhead by the total budgeted direct labor hours. The total budgeted manufacturing overhead is the sum of the budgeted variable manufacturing overhead and the budgeted fixed manufacturing overhead. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour, and the budgeted fixed manufacturing overhead is $75,000 per month. The total budgeted manufacturing overhead is therefore $5.00 per direct labor-hour + $75,000 per month = $80,000 per month. The total budgeted direct labor hours for December is 8,000 hours. The average budgeted manufacturing overhead per direct labor-hour is therefore $80,000 per month / 8,000 hours = $10.00 per direct labor-hour. However, the factory depreciation of $15,000 per month is not included in the budgeted variable manufacturing overhead or the budgeted fixed manufacturing overhead. Therefore, the average budgeted manufacturing overhead per direct labor-hour is $10.00 per direct labor-hour + $15,000 per month / 8,000 hours = $14.38 per direct labor-hour.

The Charade Corporation Is Preparing Its Manufacturing Overhead Budget for the Fourth