Smith Office Equipment Company's budgeted manufacturing overhead is $ 5 comma 400 comma 000$5,400,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 30 comma 00030,000. What is the manufacturing overhead rate?A)$195.00
B)$15.00
C)$54.00
D)$180.00

The correct answer is D.

Explanation:

Giving the following information:

The budgeted manufacturing overhead is $5,400,000. Overhead is allocated based on direct labor hours. The budgeted direct labor hours for the period are 30,000.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 5,400,000/30,000= $180 per direct labor hour.