Question

Waterway Industries is planning to sell 1000 boxes of ceramic tile, with production estimated at 670 boxes during May. Each box of tile requires 44 pounds of clay mix and a 0.75 hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $16 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Waterway has 4200 pounds of clay mix in beginning inventory and wants to have 3900 pounds in ending inventory. What is the total amount to be budgeted for manufacturing overhead for the month

Answer 1

Allocated MOH= $8,844

Step-by-step explanation:

Giving the following information:

Production= 670 boxes

Each box of tile requires 0.75 hours of direct labor.

Direct labor rate= $16 per hour.

Manufacturing overhead is applied at a rate of 110% of direct labor costs.

First, we need to determine the total direct labor costs:

Direct labor hours= 670*0.75= 502.5

Direct labor costs= 502.5*16= $8,040

To calculate the applied overhead, we need to use the following formula:

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

Allocated MOH= 1.1*8,040

Allocated MOH= $8,844