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14 April, 08:52

Axsom Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 1,300 direct labor-hours will be required in March. The variable overhead rate is $8.90 per direct laborhour. The company's budgeted fixed manufacturing overhead is $20,020 per month, which includes depreciation of $2,600. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. What should be the predetermined overhead rate for March

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  1. 14 April, 10:59
    0
    Estimated manufacturing overhead rate = $24.3 per direct labor hour

    Explanation:

    Giving the following information:

    The direct labor budget indicates that 1,300 direct labor-hours will be required in March.

    The variable overhead rate is $8.90 per direct labor hour.

    The company's budgeted fixed manufacturing overhead is $20,020 per month.

    To calculate the estimated manufacturing overhead rate we need to use the following formula:

    Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

    Estimated manufacturing overhead rate = (20,020/1,300) + 8.9

    Estimated manufacturing overhead rate = $24.3 per direct labor hour
  2. 14 April, 11:19
    0
    Overhead rate = $15.4 per direct labour hour

    Explanation:

    The predetermined overhead absorption rate = Estimated overhead for march / Estimated direct labour hours

    = $20,020 / 1,300 hours

    = $15.4 per hour

    Overhead rate = $15.4 per direct labour hour

    Note that deprecation is part of the fixed cost and that the examiner included the additional information about it just to distract the student
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