Amanha just learned her company will start a new workday policy. There is a 60% chance the company will start to enforce the policy this year and she has been tasked in determining how the new policy will affect the company. The new policy will have a significant effect on the company's production output because specific lines will close for periods of time during mandatory layoffs. The current demand of the company is 400,000 units per year. The budgeted fixed MOH costs are $920,000. She has put together the following information to plan for the coming policy: Using practical capacity, what is the budgeted fixed MOH rate? Round final answer to the nearest cent.
A)$1.06.
B)$1.97.
C)$2.30.
D)$2.37.

Question

Amanha just learned her company will start a new workday policy. There is a 60% chance the company will start to enforce the policy this year and she has been tasked in determining how the new policy will affect the company. The new policy will have a significant effect on the company's production output because specific lines will close for periods of time during mandatory layoffs. The current demand of the company is 400,000 units per year. The budgeted fixed MOH costs are $920,000. She has put together the following information to plan for the coming policy:  Using practical capacity, what is the budgeted fixed MOH rate? Round final answer to the nearest cent.
A)$1.06. 
B)$1.97. 
C)$2.30. 
D)$2.37.

Quizplus · Accepted Answer

130 x 15 x 20 x 12 months = 468,000 units
$920,000 ÷ 468,000 = $1.97 per unit.
Units per hour x hours per day x days per month x months per year = budgeted units produced
Budgeted fixed MOH ÷ budgeted units produced = budgeted fixed MOH rate

Amanha Just Learned Her Company Will Start a New Workday