Fabricators Incorporated Is a Metal-Working Facility That Manufactures Steel Parts

Essay

Fabricators Incorporated is a metal-working facility that manufactures steel parts for a variety of products. Due to the highly automated nature of the business, variable overhead is applied on the basis of machine hours. Utilities are incurred at a rate of $0.50 per machine hour, and maintenance costs at a rate of $0.20 per machine hour. Historically, Fabricators has spent 16 hours to manufacture one batch of parts. However, due to recent investments in new machinery, management believes that processing time can be reduced by 75%.
What is the standard variable overhead cost per batch?