Figure 9-4. Bickford Company plans to sell 135,000 units in November and 180,000 units in December.Bickford's policy is that 10 percent 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.
Refer to Figure 9-4.What is the budgeted overhead for November?

Question

Quizplus · Accepted Answer

The budgeted overhead for November includes both variable and fixed overhead. First, calculate the production needed for November: 135,000 units (sales) + 18,000 units (10% of December's sales) - 14,000 units (beginning inventory) = 139,000 units. Each unit requires 0.5 hours of labor, so total labor hours = 139,000 units * 0.5 hours/unit = 69,500 hours. Variable overhead = 69,500 hours * $5/hour = $347,500. Add fixed overhead of $56,500 to get total overhead: $347,500 + $56,500 = $404,000.