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22 March, 19:32

Miami solar budgets production of 5,300 solar panels for August. Each unit requires 4 hours of direct labor at a rate of $16 per hour. Variable factory overhead is budgeted to be 70% of direct labor cost, and fixed factory overhead is $180,000 per month.

Required:

a. Prepare a factory overhead budget for August.

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  1. 22 March, 20:30
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    The total factory overhead budget = $407,440

    Explanation:

    The total factory overhead budget is the addition of the variable overhead and fixed production overheads

    This is done as follows:

    Direct labour cost budgeted

    = 4hours * 5,300 * $16

    = $339,200

    Variable overhead budget

    = 70% of Direct labour cost

    = 70% * $339,200

    = $237,440

    Fixed production Overhead = $170,000

    The total factory overhead budget

    =$237,440 + $170,000

    = $407,440

    The total factory overhead budget = $407,440
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