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26 April, 10:42

Preparing an Overhead Budget Patrick Inc. makes industrial solvents. Budgeted direct labor hours for the first 3 months of the coming year are: January 13,140 February 12,300 March 15,075 The variable overhead rate is $0.70 per direct labor hour. Fixed overhead is budgeted at $2,750 per month. Required: Prepare an overhead budget for the months of January, February, and March, as well as the total for the first quarter. Do not include a multiplication symbol as part of your answer. Round total variable overhead and total overhead to the nearest dollar.

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  1. 26 April, 13:13
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    January:

    Total overhead = $11,948

    February:

    Total overhead = $11,360

    March:

    Total Overhead = $13,302.5

    Explanation:

    Giving the following information:

    Budgeted direct labor hours for the first 3 months of the coming year are:

    January = 13,140

    February = 12,300

    March 15,075

    The variable overhead rate is $0.70 per direct labor hour. Fixed overhead is budgeted at $2,750 per month.

    To calculate the total overhead for each month, we need to sum the total variable overhead and the fixed overhead. Total variable overhead is the result of applying the variable overhead rate multiplicated with the direct labor hour.

    Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

    January:

    Total overhead = (0.70*13,140) + 2,750 = $11,948

    February:

    Total overhead = (0.70*12,300) + 2,750 = $11,360

    March:

    Total Overhead = (0,70*15,075) + 2,750 = $13,302.5
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