Question

Specialized Surgical Instruments (SSI) manufactures four surgical implants. SSI uses an absorption costing system to allocate manufacturing overhead to its four products. Direct labor hours are used as the allocation base. The annual budgeted overhead rate is predetermined using a flexible budget. Fixed overhead is budgeted at $ 580,000 for the current year. The following table summarizes the budgeted number of units of each of the four implants, the budgeted number of direct labor hours per implant, and the actual direct labor hours used to produce each of the four implant models for the current year.


At the end of the current year, actual manufacturing overhead incurred was $ 1,258,300 and manufacturing overhead was underabsorbed by $ 184,800.

Required:
What was SSI’s budgeted variable overhead rate per direct labor hour in the current year? (Showcalculations.)


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  • CreatedDecember 15, 2014
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