Question

The manufacturing overhead budget at Lamy Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in August. The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $132,770 per month, which includes depreciation of $24,850. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for August should be:

	August
Budgeted direct labor-hours
Variable manufacturing overhead rate
Variable manufacturing overhead
Fixed manufacturing overhead
Total manufacturing overhead
Direct labor-hours
Predetermined overhead rate

Answer 1

Ans.	LAMY CORPORATION
		August
	Budgeted direct labor-hours	$7,100
	Variable manufacturing overhead rate	$8.60
	Variable manufacturing overhead	$61,060
	Fixed manufacturing overhead	$132,770
	Total manufacturing overhead	$193,830
	Direct labor-hours	$7,100
	Predetermined overhead rate	$27.30
	*Calculations and explanations:
	*Variable manufacturing overhead = Budgeted direct labor hours * Variable manufacturing overhead rate
	*Total manufacturing overhead   =   Variable manufacturing overhead + Fixed manufacturing overhead
	*Predetermined overhead rate = Total manufacturing overhead / Direct labor hours
	$193,830 / 7,100
	$27.30