Fill in the Blank QuestionFill in the blank question.A manufacturing company has the following budgeted overhead costs: Indirect materials: $0.50 per unit; Utilities: $0.25 per unit; Supervisory salaries: $60,000; Building rent: $80,000. If the company expects to produce 200,000 units using 100,000 hours of direct labor, the standard overhead rate will be $ per direct labor hour.
Question
Fill in the Blank QuestionFill in the blank question.A manufacturing company has the following budgeted overhead costs: Indirect materials: 0.25 per unit; Supervisory salaries: 80,000. If the company expects to produce 200,000 units using 100,000 hours of direct labor, the standard overhead rate will be $ per direct labor hour.
Solution
To calculate the standard overhead rate per direct labor hour, we first need to calculate the total overhead costs and then divide it by the total direct labor hours.
Step 1: Calculate the total overhead costs The total overhead costs include both variable and fixed costs. The variable costs are the indirect materials and utilities, which depend on the number of units produced. The fixed costs are the supervisory salaries and building rent, which do not change with the level of production.
Variable costs: Indirect materials: 100,000 Utilities: 50,000
Fixed costs: Supervisory salaries: 80,000
Total overhead costs = Variable costs + Fixed costs = 50,000 + 80,000 = $290,000
Step 2: Calculate the standard overhead rate The standard overhead rate is calculated by dividing the total overhead costs by the total direct labor hours.
Standard overhead rate = Total overhead costs / Total direct labor hours = 2.90 per direct labor hour.
So, the standard overhead rate will be $2.90 per direct labor hour.
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