The Charade Corporation is preparing its Manufacturing Overhead budget for the f

Question

The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $75,000 per month, of which $15,000 is factory depreciation. If the budgeted direct labor time for December is 8,000 hours, then average budgeted manufacturing overhead per direct labor- hour is closest to: Multiple Choice $14.38 per direct labor-hour $9.38 per direct labor-hour $12.50 per direct labor-hour

Explanation / Answer

A. $14.38 per direct labor-hour

Budgeted manufacturing overhead = $75,000 + ($5.00 per direct labor-hour × 8,000 direct labor-hours)

= $75,000 + $40,000 = $115,000

Average budgeted manufacturing overhead per unit = $115,000 ÷ 8,000 per direct labor-hour

= $14.38 per direct labor-hour

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