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Latronica Corporation: calculate predetermined overhead rate
Question
The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 6,800 direct labor-hours will be required in August. The variable overhead rate is $7.30 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $138,720 per month, which includes depreciation of $24,890. 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:
a. $27.70
b. $24.20
c. $7.30
d. $20.40
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