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Bickford Company plans to sell 135,000 units in November and 180,000 units in December. Bickford's policy is that 10% of the following month's sales must be in ending inventory. On November 1, there were 14,000 units in inventory. It takes 30 minutes of direct labor time to make one unit. Direct labor wages average $17 per hour. Variable overhead is applied at the rate of $5 per direct labor hour. Fixed overhead is budgeted at $56,500 per month. What is the budgeted overhead for November

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Answer:

$404,000

Explanation:

Production Unit = $135,000 + $18,000 - $14,000 = $139,000

Labor hours per unit = 30 mins = 0.5 hours

Total Labor Hours = $139,000 x 0.5 = 69,500 hours

Variable Overhead 69,500 x 5 = $347,500

Total Overhead Cost = $347, 500 + $56,500 = $404,000

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