Fredin Incorporated makes a single product-an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: The variable component of the predetermined overhead rate is closest to:
A) $2.68 per labor-hour
B) $3.02 per labor-hour
C) $2.93 per labor-hour
D) $2.41 per labor-hour

Question

Fredin Incorporated makes a single product-an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:  The variable component of the predetermined overhead rate is closest to:
A) $2.68 per labor-hour 
B) $3.02 per labor-hour 
C) $2.93 per labor-hour 
D) $2.41 per labor-hour

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate = $80,400/30,000 labor-hours
= $2.68 per labor-hour

Fredin Incorporated Makes a Single Product-An Electrical Motor Used in Many