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.

Question

Alannah Leonard

Business

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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Ean Vaughan · Answer 1

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.