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30 January, 03:32

A manufacturing company has the following budgeted overhead costs: Indirect materials: $0.50 per unit; Utilities: $0.25 per unit; Supervisory salaries: $60,000; Building rent: $80,000. If the company expects to produce 200,000 units using 100,000 hours of direct labor, the standard overhead rate will be $ per direct labor hour.

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  1. 30 January, 03:48
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    Total overhead $

    Indirect material ($0.5 x 200,000 units) = 100,000

    Utilities ($0.25 x 200,000 units) = 50,000

    Supervisory salaries = 60,000

    Building rent = 80,000

    Total overhead 290,000

    Overhead rate = Budgeted overhead

    Budgeted direct labour hours

    = $290,000

    100,000 hours

    = $2.90 per direct labour hour

    Explanation:

    In this case, we need to obtain the total overhead, which is the total of indirect material, utilities, supervisory salaries and building rent.

    Then, we will divide the total overhead by direct labour hours so as to determine the overhead rate.
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