Question

E21-11  prepare a manufacturing overhead budget for the year
Atlanta Company is preparing its manufacturing overhead budget for 2017.  Relevant data
consist of the following.
	Units to be produced (by quarters):  10,000, 12,000, 14,000, 16,000.
	Direct labor: time is 1.5 hour per unit.
	Variable overhead costs per direct labor hour:  indirect materials $0.80; indirect labor
	$1.20; and maintenance $0.50.
	Fixed overhead costs per quarter:  supervisory salaries $35,000; depreciation $15,000;
	and maintenance $12,000.
Instructions
Prepare the manufacturing overhead budget for the year; showing quarterly data.
ATLANTA COMPANY
Manufacturing Overhead Budget
For the Year Ending December 31, 2017
				Quarter
				1	2	3	4	Year
Units to be produced
Direct labor hours per unit				1.5	1.5	1.5	1.5	1.5
Total direct labor hours
Variable costs
Indirect materials ($0.80/hour)
Indirect labor ($1.20/hour)
Maintenance ($0.50/hour)
Total variable
Fixed costs
Supervisory salaries
Depreciation
Maintenance
Total fixed
Total manufacturing overhead
Manufacturing overhead rate per direct labor hour

Answer 1

ATLANTA COMPANY
Manufacturing overhead budget
	Quarter
	1	2	3	4	Year
Units to be produced	10,000	12,000	14,000	16,000	52,000
Direct labor hours per unit	1.5	1.5	1.5	1.5	1.5
Total direct labor hours	10,000*1.5 = 15,000	12,000*1.5 = 18,000	14,000*1.5 = 21,000	16,000*1.5 = 24,000	52,000*1.5 = 78,000
Variable manufacturing overhead
Indirect material	15,000*$0.80 = $12,000	18,000*$0.80 = $14,400	21,000*$0.80 = $16,800	24,000*$0.80 = $19,200	$                      62,400
Indirect labor	15,000*$1.20 = $18,000	18,000*$1.20 = $21,600	21,000*$1.20 = $25,200	24,000*$1.20 = $28,800	$                      93,600
Maintenance	15,000*$0.50 = $7,500	18,000*$0.50 = 9,000	21,000*$0.50 = $10,500	24,000*$0.50 = $12,000	$                      39,000
Total Variable manufacturing overhead	$                                 37,500	$                                 45,000	$                                 52,500	$                                 60,000	$                    195,000
Fixed manufacturing overhead
Supervisory salaries	$                                 35,000	$                                 35,000	$                                 35,000	$                                 35,000	$                    140,000
Depreciation	$                                 15,000	$                                 15,000	$                                 15,000	$                                 15,000	$                      60,000
Maintenance	$                                 12,000	$                                 12,000	$                                 12,000	$                                 12,000	$                      48,000
Total Fixed manufacturing overhead	$                                 62,000	$                                 62,000	$                                 62,000	$                                 62,000	$                    248,000
Total Manufacturing overhead	$                                 99,500	$                               107,000	$                               114,500	$                               122,000	$                    443,000

Manufacturing overhead rate per direct labor hour = $443,000/78,000 = $5.68

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