Figure 4-1 The Foremost Company Predicted Factory Overhead for 2016 and 2017

Multiple Choice

Figure 4-1
The Foremost Company predicted factory overhead for 2016 and 2017 would be $120,000 for each year. The predicted activity for 2016 and 2017 were 30,000 and 20,000 direct labor hours, respectively. Additional data are as follows:
The company assumes that the long-run normal production level is 20,000 direct labor hours per year. The actual factory overhead cost for the end of 2016 and 2017 was $120,000. Assume that it takes one direct labor hour to make one finished unit.
-Refer to Figure 4-2. The actual overhead rate for applying manufacturing overhead is

A) $7.14.
B) $7.50.
C) $10.00.
D) $10.50.