Question

Eberley Corporation's cost formula for its manufacturing overhead is $25,700 per month plus $10 per machine-hour. For the month of July, the company planned for activity of 5,900 machine-hours, but the actual level of activity was 5,920 machine-hours. The actual manufacturing overhead for the month was $86,800. The manufacturing overhead in the planning budget for July would be closest to:

Answer 1

$84,700

Explanation:

The computation of manufacturing overhead in the planning budget for July is shown below:-

Manufacturing overhead in the planning budget = Manufacturing overhead per month + Budgeted hours × Budgeted rate

= $25,700 + 5,900 × $10

= $25,700 + $59,000

= $84,700

Therefore for computing the manufacturing overhead in the planning budget for July we simply applied the above formula.