Lester Production is planning to sell 600 boxes of ceramic tile, with production estimated at 580 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.50 per pound and employees of the company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Lester has 2,600 pounds of clay mix in beginning inventory and wants to have 3,000 pounds in ending inventory.
What is the total amount to be budgeted for manufacturing overhead for the month?
A) $2,392.50
B) $2,475
C) $9,570
D) $9,900

Question

Quizplus · Accepted Answer

Manufacturing overhead is applied at a rate of 110% of direct labor costs. Direct labor costs are $15.00 per hour * 0.25 hours per box * 600 boxes = $2,250.00. Therefore, manufacturing overhead is $2,250.00 * 110% = $2,475.00.

Lester Production Is Planning to Sell 600 Boxes of Ceramic