The manufacturing overhead budget at Formica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,400 direct labor-hours will be required in October. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $86,680 per month, which includes depreciation of $16,280. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for October should be:

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by adding the variable overhead cost per direct labor-hour to the fixed overhead cost per direct labor-hour. Variable overhead cost = 4,400 hours * $8.90/hour = $39,160. Total fixed overhead = $86,680. Total overhead = $39,160 + $86,680 = $125,840. Predetermined overhead rate = $125,840 / 4,400 hours = $28.60.

The Manufacturing Overhead Budget at Formica Corporation Is Based on Budgeted