Question

Smith Office Equipment Company's budgeted manufacturing overhead is $5,400,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 30,000. What is the manufacturing overhead rate?

Answer 1

$180 per direct labor hour

Step-by-step explanation:

Manufacturing overhead rate is calculated by dividing the budgeted overhead by the budgeted level of activity on which the overhead is applied. It is a rate at which the overhead is applied to a product / project/ department.

Manufacturing overhead rate = Budgeted overhead / Budgeted activity

Manufacturing overhead rate = Budgeted overhead / Budgeted direct labor hours

Manufacturing overhead rate = $5,400,000 / 30,000

Manufacturing overhead rate = $180 per direct labor hour