The Ramirez Company budgets variable manufacturing overhead at 60% of direct labor costs.If the company estimates that 10,000 direct labor hours will be used at an average rate of $8.50 per hour.Fixed manufacturing overhead costs are budgeted at $45,000 with $10,000 of that amount being depreciation on plant machinery.Total budgeted manufacturing overhead will be:
A)$130,000
B)$96,000
C)$120,000
D)$86,000

Question

Quizplus · Accepted Answer

Variable manufacturing overhead is calculated as 60% of direct labor costs. Direct labor costs are 10,000 hours * $8.50/hour = $85,000. So, variable manufacturing overhead is 60% * $85,000 = $51,000. Adding the fixed manufacturing overhead costs of $45,000 gives a total of $96,000.

The Ramirez Company Budgets Variable Manufacturing Overhead at 60% of Direct