The manufacturing overhead budget at pendley corporation is based on budgeted direct labor-hours. the direct labor budget indicates that 8,900 direct labor-hours will be required in august. the variable overhead rate is $5.50 per direct labor-hour. the company's budgeted fixed manufacturing overhead is $133,500 per month, which includes depreciation of $30,260. all other fixed manufacturing overhead costs represent current cash flows. the company recomputes its predetermined overhead rate every month. what should be the predetermined overhead rate for august? a. $5.50 b. $17.10 c. $15.00 d. $20.50

Correct option is B) $17.10

Total overhead rate per hour = $17.10

Explanation:

Overhead rates are based on cash outflow, they are not allocated and computed based on non cash items.

Total direct labor hours = 8,900

Thus total variable overhead rate = $5.50

Total cash fixed cost = $133,500 - $30,260 = $103,240

Fixed cost overhead rate = $103,240/8,900 = $11.60

Total overhead cost per hour = Variable overhead + Fixed Overhead = $5.50 + $11.60 = $17.10

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