Wicks Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Budgeted costs at 100,000 direct labour-hours are as follows:$\begin{array} { l l }
\text { Variable costs (total):}\
\text { Packing supplies } & £ 70,000 \ \text { Indirect labour } & £ 90,000\
\text { Fixed costs (total):}\
\text { Utilities}& £50,000\
\text { Rent}& £20,000\
\text { Insurance}& £10,000
\end{array}$

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The flexible budget for factory overhead would show that the variable overhead per direct labour-hour is

Question

Wicks Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Budgeted costs at 100,000 direct labour-hours are as follows:$\begin{array} { l l } 
\text { Variable costs (total):}\
\text { Packing supplies } & £ 70,000 \ \text { Indirect labour } & £ 90,000\
 \text { Fixed costs (total):}\
 \text { Utilities}& £50,000\
 \text { Rent}& £20,000\
 \text { Insurance}& £10,000
 \end{array}$

-
The flexible budget for factory overhead would show that the variable overhead per direct labour-hour is

Quizplus · Accepted Answer

To calculate the variable overhead per direct labour-hour, we divide the total variable overhead costs by the total direct labour-hours. From the information given, the total variable overhead costs are £160,000 (£120,000 + £40,000). 
Dividing £160,000 by 100,000 direct labour-hours gives us a variable overhead rate of £1.60 per direct labour-hour. Therefore, the correct answer is B.

Wicks Company Has Established a Flexible Budget for Manufacturing Overhead