Templeton Widgets Applies Manufacturing Overhead Based on Direct Labor Hours

question 149

Multiple Choice

Templeton Widgets applies manufacturing overhead based on direct labor hours.It budgeted 123,000 direct labor hours at $11.50 per labor hour and incurred 125,000 direct labor hours at an actual total labor cost of $1,500,000.It incurred $720,000 of manufacturing overhead and estimated the manufacturing overhead cost to be $707,250 for the period.What was the predetermined overhead rate?

• A)$0.50
• B)$5.75
• C)$0.48
• D)$5.76

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Definitions:

Predetermined Overhead Rate

An established rate used to apply manufacturing overhead costs to products, calculated in advance based on expected costs and activity levels.

Labor-Hour

A measure of work effort quantified in hours, commonly used to allocate costs or measure productivity in various contexts.

Fixed Overhead Volume Variance

A financial metric indicating the difference between the budgeted and actual volume of production, multiplied by the fixed overhead rate per unit.

Fixed Overhead Volume Variance

The difference between the budgeted and actual volume of production, which results in a variance in fixed overhead costs allocated per unit.