The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 1,600 direct labor-hours will be required in February. The variable overhead rate is $3.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $28,320 per month, which includes depreciation of $3,680. All other fixed manufacturing overhead costs represent current cash flows.The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for February should be:

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the total budgeted manufacturing overhead by the total budgeted direct labor-hours. In this case, the total budgeted manufacturing overhead is $28,320 + (1,600 direct labor-hours x $3.40 per direct labor-hour) = $32,080. The total budgeted direct labor-hours are 1,600. Therefore, the predetermined overhead rate is $32,080 / 1,600 direct labor-hours = $21.10 per direct labor-hour.

The Manufacturing Overhead Budget at Polich Corporation Is Based on Budgeted