Question

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory.

Required:
What is the total amount to be budgeted for manufacturing overhead for the month?

Answer 1

Answer:

Budgeted overhead= $2,877.6

Explanation:

Giving the following information:

Direct labor required:

Production= 870 units

Direct labor hours= 870*0.25= 218 hours

Direct labor cost= $12 an hour

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

To calculate the allocated overhead for the period, we need to use the following formula:

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

Direct labor cost= 218*12= $2,616

Allocated MOH= 1.1*2,616= $2,877.6