Manufacturing overhead budget at Mahapatra Corporation: calculate predetermined overhead rate for a month

Question

The manufacturing overhead budget at Mahapatra Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 9,000 direct labor-hours will be required in May. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $116,100 per month, which includes depreciation of $18,260. All other fixed manufacturing overhead costs represent current cash flows.

The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for May should be:

a. $21.80

b. $19.50

c. $8.90

d. $12.90