Addison Co. budgets production of 2,750 units during the second quarter. Other information is as follows: Direct labor Each finished unit requires 3 direct labor hours, at a cost of $7 per hour. Variable overhead Applied at the rate of $9 per direct labor hour. Fixed overhead Budgeted at $540,000 per quarter. 1. Prepare a direct labor budget. 2. Prepare a factory overhead budget.

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Business

Kianna Bolton

29 March, 05:09

Addison Co. budgets production of 2,750 units during the second quarter. Other information is as follows: Direct labor Each finished unit requires 3 direct labor hours, at a cost of $7 per hour. Variable overhead Applied at the rate of $9 per direct labor hour. Fixed overhead Budgeted at $540,000 per quarter. 1. Prepare a direct labor budget. 2. Prepare a factory overhead budget.

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Ella Jensen · Answer 1

Direct Labor Hours Budget 8250

Direct Labor Costs Budget $ 57750

Factory Overhead Budget $ 614250

Explanation:

We multiply the direct labor hours per unit to the number of units to get the total direct labor hours which are again multiplied with the direct labor cost per hour to get the total direct labor costs.

Addison Co.

Direct Labor Budget

Quarter II

Production units 2750

Direct Labor per unit 3

Direct Labor Hours 8250

Direct Labor Cost / Hr $7

Direct Labor Costs $ 57750

We multiply the direct labor costs with variable overhead per hour to get the variable costs which are added to the fixed costs per quarter to get the total factory overhead budget.

Addison Co.

Factory Overhead Budget

Quarter II

Direct Labor Hours 8250

Variable OH / Hr $ 9

Variable Overheads $ 74250

+Fixed Overheads $ 540,000

Factory Overhead Budget $ 614250