Golebiewski Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 4,900 direct labor-hours will be required in November. The variable overhead rate is $8.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $78,400 per month, which includes depreciation of $10,290. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for November should be:

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated total manufacturing overhead costs by the estimated total direct labor-hours.

Estimated Total Manufacturing Overhead Costs = Variable Manufacturing Overhead + Fixed Manufacturing Overhead (excluding depreciation)
= ($8.40 x 4,900) + ($78,400 - $10,290) 
= $41,160 + $68,110 
= $109,270

Predetermined Overhead Rate = Estimated Total Manufacturing Overhead Costs ÷ Estimated Total Direct Labor-Hours 
= $109,270 ÷ 4,900 
= $22.30 per direct labor-hour

Therefore, the answer is C ($24.40) as it is the closest option to the calculation of $22.30.