The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $75,000 per month, of which $15,000 is factory depreciation. If the budgeted direct labor time for December is 8,000 hours, then average budgeted manufacturing overhead per direct labor-hour is closest to: Multiple Choice $14.38 per direct labor-hour $12.50 per direct labor-hour $9.38 per direct labor-hour $16.25 per direct labor-hour

Correct answer is A.

$14.38 per direct labor-hour

Explanation:

If the budgeted direct labor time for December is 8,000 hours, then total budgeted factory overhead per direct labor hour is (rounded):

Total budgeted factory overhead for December= Variable Factory Overhead rate per direct labor hour *  budgeted direct labor time for December + Fixed Factory Overhead per month

Total budgeted factory overhead for December = 5*8000 + 75000

Total budgeted factory overhead for December = $ 115,000

Total budgeted factory overhead per direct labor hour = Total budgeted factory overhead for December/budgeted direct labor time for December

Total budgeted factory overhead per direct labor hour = 115000/8000

Total budgeted factory overhead per direct labor hour = 14.38