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Each unit requires 4 hours of direct labor at a rate of $16 per hour. Variable factory overhead is budgeted to be 70% of direct labor cost, and fixed factory overhead is $180,000 per month. Prepare a factory overhead budget for August.

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Answer:

Total budgeted overhead= $224,800

Explanation:

Giving the following information:

Each unit requires 4 hours of direct labor at a rate of $16 per hour.

Suppose 1,000 units are budgeted to produce.

First, we need to calculate the direct labor cost:

Direct labor cost= (4*16)*1,000= $64,000

Now, the overhead budget:

Variable overhed= 64,000*0.7= $44,800

Fixed overhead= 180,000

Total budgeted overhead= $224,800

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