Question

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense. Knowledge Check 01 What is the budgeted variable manufacturing overhead for the year? .
a) $200,000
b) $260,000
c) $280,000
d) $400,000

Answer 1

Answer:

Option D. $400,000

Explanation:

The Variable manufacturing overhead for the year can be calculated using the following formula:

Variable OH Budget = Budgeted Variable OH rate per machine-hour × Total machine hours worked in the year

Here

Budgeted V.O.H Rate = $4 per Machine Hour

Total Machine Hours worked = 100,000 Machines hours

By putting the values in the equation, we have:

Variable OH Budget = $4 × 100,000 = $400,000