Jordan Manufacturing Company expects to incur the following per unit costs for 1,000 units of production: $\begin{array}{ll}
\text { Direct materials } & 31 \mathrm{~b} . @ 5=£ 15 \
\text { Direct labour } & 1 \mathrm{hr} @ £ 6=£ 6 \
\text { Variable overhead } & 75 \% \text { of direct labour costs } \
\text { Fixed overhead } & 50 \% \text { of direct labour costs }
\end{array}$ What is the total amount of overhead included in the overhead budget?

Question

Jordan Manufacturing Company expects to incur the following per unit costs for 1,000 units of production: $\begin{array}{ll}
\text { Direct materials } & 31 \mathrm{~b} . @ 5=£ 15 \
\text { Direct labour } & 1 \mathrm{hr} @ £ 6=£ 6 \
\text { Variable overhead } & 75 \% \text { of direct labour costs } \
\text { Fixed overhead } & 50 \% \text { of direct labour costs }
\end{array}$  What is the total amount of overhead included in the overhead budget?

Quizplus · Accepted Answer

The total overhead includes both variable and fixed overheads. Variable overhead is 75% of direct labor costs (£6), which is £4.50 per unit. Fixed overhead is 50% of direct labor costs (£6), which is £3 per unit. Therefore, the total overhead per unit is £7.50 (£4.50 + £3). For 1,000 units, the total overhead budget is £7,500 (£7.50 * 1,000).

Jordan Manufacturing Company Expects to Incur the Following Per Unit