The following information is available for Touchwood Corporation: Budgeted manufacturing overhead $20,000 Actual manufacturing overhead $22,000 Budgeted direct labor hours 8,000 Actual direct labor hours 10,000 Calculate the budgeted manufacturing overhead rate if overhead is allocated on the basis of direct labor hours.

The budgeted manufacturing overhead rate amounts to $2.50

Explanation:

Budget for the manufacturing overhead is defined as the amount that is set aside and needed to cover the costs of the overhead.

The budgeted manufacturing overhead rate is computed as:

Manufacturing manufacturing overhead rate = Budgeted manufacturing overhead / Budgeted direct manufacturing labor hours

where

Budgeted manufacturing overhead amounts to $20,000

Budgeted direct manufacturing labor hours is 8,000

So, putting the values above:

Manufacturing manufacturing overhead rate = $20,000 / 8,000

Manufacturing manufacturing overhead rate = $2.50