Arciba Inc. bases its manufacturing overhead budget on budgeted direct labor-hours.

The direct labor

budget indicates that 7,400 direct labor-hours will be required in January. The variable overhead rate is
$9.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $130,980 per
month, which includes depreciation of $10,360. All other fixed manufacturing overhead costs represent
current cash flows. The company recomputes its predetermined overhead rate every month. The
predetermined overhead rate for January should be: A) $27.20 B) $25.80 C) $17.70 D) $9.50 Ans: A
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: $9.50 +
($130,980 ÷ 7,400) = $9.50 + $17.70 = $27.20