Addison Co. budgets production of 2,790 units during the second quarter. Other information is as follows: Direct labor Each finished unit requires 5 direct labor hours, at a cost of $10 per hour. Variable overhead Applied at the rate of $12 per direct labor hour. Fixed overhead Budgeted at $580,000 per quarter. 1. Prepare a direct labor budget. 2. Prepare a factory overhead budget.

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Business

Aimee Ramos

26 December, 20:40

Addison Co. budgets production of 2,790 units during the second quarter. Other information is as follows: Direct labor Each finished unit requires 5 direct labor hours, at a cost of $10 per hour. Variable overhead Applied at the rate of $12 per direct labor hour. Fixed overhead Budgeted at $580,000 per quarter. 1. Prepare a direct labor budget. 2. Prepare a factory overhead budget.

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Cynthia · Answer 1

Answer and Explanation:

1. The preparation of direct labor budget is given below:-

Direct labor budget

Units to be produced 2,790

Hours required per unit 5

Total labor hours needed 13,950

(2,790 * 5)

Labor rate per hour $10

Direct labor budget $139,500

(13,950 * $10)

2. The preparation of factory overhead budget is given below:-

Total labor hours needed 13,950

Variable overhead rate per hour $12

Budgeted variable overheads $167,400

(13,950 * $12)

Budgeted Fixed overheads $580,000

Budgeted total overheads $747,400