Rutherford Wheel and Axle, Incorporated, has an automated production process, and production activity is quantified in terms of machine hours. A standard-costing system is used. The annual static budget for 20x1 called for 6,000 units to be produced, requiring 30,000 machine hours. The standard overhead rate for the year was computed using this planned level of production. The 20x1 manufacturing cost report follows.

Rutherford develops flexible budgets for different levels of activity for use in evaluating performance. A total of 6,200 units was produced during 20x1, requiring 32,000 machine hours. The preceding manufacturing cost report compares the companys actual cost for the year with the static budget and the flexible budget for two different activity levels.

5. Compute the variable-overhead rate per machine hour in a flexible-budget formula. (Hint: Use the high low method to estimate cost behavior.)

RUTHERFORD WHEEL AND AXLE, INCORPORATED Manufacturing Cost Report For 201 (in thousands of dollars) Static \begin{tabular}{ccc} Budget & Flexible Budget \\ \hline 30,000 & 31,000 & 32,000 \\ Machine & Machine & Machine \end{tabular} Cost Item Hours Hours Hours Actual Cost Direct material: G27aluminumM14steelalloy$252.078.0$260.480.6$268.883.2$270.083.0 Direct labor: Assembler Grinder 273.0234.0282.1241.8291.2249.6287.0250.0 Production overhead: Maintenance Supplies Supervision Inspection Insurance Depreciation Total cost \begin{tabular}{rrrr} 24.0 & 24.8 & 25.6 & 25.0 \\ 129.0 & 133.3 & 137.6 & 130.0 \\ 80.0 & 82.0 & 84.0 & 81.0 \\ 144.0 & 147.0 & 150.0 & 147.0 \\ 50.0 & 50.0 & 50.0 & 50.0 \\ 200.0 & 200.0 & 200.0 & 200.0 \\ \hline$1,464.0$1,502.0$1,540.0 & $1,523.0 \\ \hline \hline \end{tabular}