Dean Company Uses a Standard Cost System in Which It

Dean Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labour-hours. The company is preparing a flexible budget for next year and the following data are available: $\begin{array}{ll}&\text { At capacity }\\\text { Direct labour-hours } & 60,000 \\\text { Variable factory overhead } & £ 150,000 \\\text { Fixed factory overhead } & £ 240,000\end{array}$
Assume that Dean's denominator activity for the year is set at 80% of capacity. What would be the total predetermined overhead rate, based on direct labour-hours, for the year

A) £6.00.
B) £6.50.
C) £7.50.
D) £8.13.

Correct Answer:

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