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Overhead Budget Johnston Company cleans and applies powder coat paint to metal items on a job-order...

Overhead Budget

Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various overhead categories in the coming year.

Supplies $223,000
Gas 56,000
Indirect labor 172,000
Supervision 77,500
Depreciation on equipment 46,000
Depreciation on the buliding 48,000
Rental of special equipment 11,000
Electricity (for lighting, heating, and air conditioning) 27,000
Telephone 4,600
Landscaping service 2,000
Other overhead 58,000

In the coming year, Johnston expects to powder coat 170,000 units. Each unit takes 1.3 direct labor hours. Johnston has found that supplies and gas (used to run the drying ovens—all units pass through the drying ovens after powder coat paint is applied) tend to vary with the number of units produced. All other overhead categories are considered to be fixed.

Required:

1. Calculate the number of direct labor hours Johnston must budget for the coming year. Calculate the variable overhead rate. Calculate the total fixed overhead for the coming year. When required, round your answers to the nearest cent and use the rounded answers in subsequent requirements.

Direct labor hours
Variable overhead rate $ per direct labor hour
Total fixed overhead $

2. Prepare an overhead budget for Johnston for the coming year. Show the total variable overhead, total fixed overhead, and total overhead. When required, round your answers to the nearest cent.

Johnston Company
Overhead Budget
For the Coming Year
Budgeted direct labor hours
Variable overhead rate $
Budgeted variable overhead $
Budgeted fixed overhead
Total budgeted overhead $

Calculate the fixed overhead rate and the total overhead rate. If required, round your answers to the nearest cent.

Fixed overhead rate $ per direct labor hour
Total overhead rate $ per direct labor hour

3. What if Johnston had expected to make 168,000 units next year? Assume that the variable overhead per unit does not change and the total fixed overhead amounts do not change. Calculate the new budgeted direct labor hours.

Prepare a new overhead budget. If required, round your answers to the nearest cent.

Johnston Company
New Overhead Budget
For the Coming Year
Budgeted direct labor hours
Variable overhead rate $
Budgeted variable overhead $
Budgeted fixed overhead
Total budgeted overhead $

Calculate the fixed overhead rate and the total overhead rate. If required, round your answers to the nearest cent.

Fixed overhead rate $ per direct labor hour
Total overhead rate $ per direct labor hour

Solutions

Expert Solution

Req 1.
Expected output 170000
DLH required perr Unit 1.3
Total DLH required 221000
Total Variable OH 279000
(223000+56000)
Variable OH per DLH 1.26
Total Fixed Oh:
Indirect Labour 172000
Supervision 77500
Depreciation on equipment 46000
Depreciationon Building 48000
Rental on special equipment 11000
Electricity expenses 27000
Telephone 4600
Landscaping service 2000
Other overheads 58000
Total Fixed Oh: 446100
Req 2.
Overheads Budget:
Budgeted Labour hours 221000
Variable OH rate 1.26
Budgeted Variable OH 279000
Budgeted Fixed OH 446100
Total Budgeted OH 725100
Fixed OH rate per DLH (446100/221000) 2.02
Total OH per DLH (725100/221000) 3.28
Req 3.
Overheads Budget:
Budgeted Labour hours 218400 (168000*1.3)
Variable OH rate 1.26
Budgeted Variable OH 275184
Budgeted Fixed OH 446100
Total Budgeted OH 721284
Fixed OH rate per DLH (446100/218400) 2.04
Total OH per DLH (721284/218400) 3.3

ekkarill92 answered 2 years ago
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