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Addison Co. budgets production of 2,400 units during the second quarter. Other information is as follows: Direct labor Each finished unit requires 4 direct labor hours, at a cost of $20 per hour. Variable overhead Applied at the rate of $11 per direct labor hour. Fixed overhead Budgeted at $450,000 per quarter. 1. Prepare a direct labor budget. 2. Prepare a factory overhead budget.

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Answer:

1. Total direct labor: $192,000

2. Total factory overhead budget: $555,600

Explanation:

1. Total direct labor

                                                 Addison Co.

                        Direct labour budget for the second quarter

Budgeted production units          2,400

Direct labor hour per one unit             4

Total direct labor hour needed    9,600

Cost per one direct labor                    20

Total direct labor                       $192,000

2. Total factory overhead budget:

                                                       Addison Co.

                        Factory overhead budget for the second quarter                    

Total direct labor hours needed               9,600

Variable rate per direct labor                           11

Budgeted variable overhead               $105,000

Budgeted fixed overhead                    $450,000

Total factory overhead                         $555,000

   

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