Morton Company’s variable manufacturing overhead should be $4.50 per standard direct labor-hour and fixed manufacturing should be $270,000 per year.
The company manufactures a single product that requires two direct labor-hours to complete. The direct labor wage rate is $15 per hour. Four feet of raw material are required for each unit of product; the standard cost of the material is $8.75 per foot.
Although normal activity is 30,000 direct labor-hours each year, the company expects to operate at a 40,000-hour level of activity this year
Assume that the company actually produces 18,000 units and works 38,000 direct labor-hours during the year. Actual manufacturing overhead costs for the year are: Variable manufacturing overhead cost...... $174,800 Fixed manufacturing overhead cost.......... 271,600 Total manufacturing overhead cost.......... $446,400 Page 520 Do the following: a. Compute the standard direct labor-hours allowed for this year’s production.