A company’s flexible budget for last month shows that actual indirect materials cost, an overhead variable cost, was $31,178, and that the rate variance for indirect materials cost was $2,261 unfavorable. The company uses machine hours as its cost-allocation base for allocating manufacturing overhead. During that month, the company worked 11,900 machine-hours. Budgeted activity for the month had been 12,200 machine-hours. What must have been the standard rate per machine-hour for indirect materials?

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Cricetus Cricetus · Answer 1 · 2021-05-16T06:51:06+02:00

Answer:

The right answer is "$2.43".

Explanation:

The given values are:

Overhead material cost,

= $31,178

Rate variance (unfavorable),

= $2,261

Company worked,

= 11,900 hours

Budgeted activity,

= 12,200 hours

Now,

The budgeted material cost will be:

= [tex]Overhead \ material \ cost-Rate \ variance[/tex]

= [tex]31178-2261[/tex]

= [tex]28917[/tex] ($)

hence,

For indirect materials, the rate per machine hour will be:

= [tex]\frac{Budgeted \ materials \ cost}{Company \ worked \ hours}[/tex]

= [tex]\frac{28917}{11900}[/tex]

= [tex]2.43[/tex]