Sierra Tool Manufacturing Ltd. manufactures hammers at their Hamilton facility. For next month the vice-president of production plans on producing 2,700 hammers per day. The company can produce as many as 4,000 hammers per day, but are more likely to produce 3,500 per day. The demand for wrenches for the next three years is expected to average 3,100 wrenches per day. Fixed manufacturing costs per month total $282,400. The company works 22 days a month due to local zoning restrictions. Fixed manufacturing overhead is charged on a per wrench basis.
Required:
a. What is the theoretical fixed manufacturing overhead rate per wrench?
b. What is the practical fixed manufacturing overhead rate per wrench?
c. What is the normal fixed manufacturing overhead rate per wrench?
d. What is the master-budget fixed manufacturing overhead rate per wrench?

Question

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The Answer of Sierra Tool Manufacturing Ltd. manufactures hammers at their Hamilton facility. For next month the vice-president of production plans on producing 2,700 hammers per day. The company can produce as many as 4,000 hammers per day, but are more likely to produce 3,500 per day. The demand for wrenches for the next three years is expected to average 3,100 wrenches per day. Fixed manufacturing costs per month total $282,400. The company works 22 days a month due to local zoning restrictions. Fixed manufacturing overhead is charged on a per wrench basis.
Required:
a. What is the theoretical fixed manufacturing overhead rate per wrench?
b. What is the practical fixed manufacturing overhead rate per wrench?
c. What is the normal fixed manufacturing overhead rate per wrench?
d. What is the master-budget fixed manufacturing overhead rate per wrench?