Question

Bickford Company plans to sell 135,000 units in November and 180,000 units in December. Bickford's policy is that 10% of the following month's sales must be in ending inventory. On November 1, there were 14,000 units in inventory. It takes 30 minutes of direct labor time to make one unit. Direct labor wages average $17 per hour. Variable overhead is applied at the rate of $5 per direct labor hour. Fixed overhead is budgeted at $56,500 per month. What is the budgeted overhead for November

Answer 1

The budgeted overhead for November is $1,541,500, calculated by adding the fixed overhead cost, direct labor cost, and variable overhead cost.

Step-by-step explanation:

To calculate the budgeted overhead for November, we need to consider the direct labor cost and the variable overhead cost. First, we will calculate the direct labor cost. Since it takes 30 minutes of direct labor time to make one unit and there were 135,000 units planned to be sold in November, the total direct labor hours required will be 135,000 units x 30 minutes/unit ÷ 60 minutes/hour = 67,500 hours.

Next, we'll calculate the direct labor cost by multiplying the total direct labor hours by the labor wage rate of $17 per hour. The direct labor cost will be 67,500 hours x $17/hour = $1,147,500.

Now, let's calculate the variable overhead cost. Since the variable overhead rate is $5 per direct labor hour, the variable overhead cost will be 67,500 hours x $5/hour = $337,500.

Finally, to calculate the budgeted overhead for November, we'll add the fixed overhead cost of $56,500 per month to the direct labor cost and the variable overhead cost for November. The budgeted overhead for November will be $56,500 + $1,147,500 + $337,500 = $1,541,500.