Question -
Armstrong Foods processes bags of organic frozen vegetables sold at specialty grocery stores. The company allocates manufacturing overhead based on direct labor hours. Armstrong has budgeted fixed manufacturing overhead for the year to be $625,000. The predetermined fixed manufacturing overhead rate is $16.40 per direct labor hour, while the standard variable manufacturing overhead rate is $0.90 per direct labor hour. The direct labor standard for each case is one-quarter (.25) of an hour.
The company actually processed 154,000 cases of frozen organic vegetables during the year and incurred $680,000 of manufacturing overhead. Of this amount $636,000 was fixed. The company also incurred a total of 40,800 direct labor hours.
a) How much variable overhead would have been allocated to production?
b) How much fixed overhead would have been allocated to production?