Asked by Deandra Kirkland on Jun 12, 2024
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Arciba Incorporated bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,400 direct labor-hours will be required in January. The variable overhead rate is $9.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $130,980 per month, which includes depreciation of $10,360. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for January should be:
A) $27.20
B) $25.80
C) $17.70
D) $9.50
Variable Overhead Rate
Variable overhead rate is the cost of variable overhead (expenses that change with the level of production) allocated per unit of production activity, such as labor-hours or machine-hours.
Direct Labor-Hours
The total hours worked by employees who are directly involved in the manufacturing process or production of goods.
Fixed Manufacturing Overhead
Indirect manufacturing costs that remain constant regardless of the level of production, such as factory rent and salaries of production supervisors.
- Grasp the fundamentals of drafting a budget dedicated to manufacturing overhead, with a clear demarcation between variable and constant costs.
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Learning Objectives
- Grasp the fundamentals of drafting a budget dedicated to manufacturing overhead, with a clear demarcation between variable and constant costs.
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