Manufacturer estimates that it will incur variable indirect costs for the month of October of $70,000 and $30,000 of fixed costs. The company uses direct labor hours to calculate the predetermined overhead rate and predicted that 3,000 direct labor hours would be used in October. Actual direct labor hours amounted to 3,200. 1) What is the allocation rate per direct labor hour for October? 2) What is the total cost allocation for October?

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.