The Covey Corporation Is Preparing Its Manufacturing Overhead Budget for the Fourth

question 128

Multiple Choice

The Covey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $4.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $64,000 per month, of which $18,000 is factory depreciation. If the budgeted direct labor time for October is 8,000 hours, then the total budgeted manufacturing overhead for October is:

• A)$96,000
• B)$78,000
• C)$64,000
• D)$76,000

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Definitions:

Relevant Costs

Those costs and revenues that differ across alternatives.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Variable Overhead

Variable overhead refers to costs that fluctuate with production levels, such as utilities and raw materials, unlike fixed overhead costs which remain constant regardless of production volume.