Determining Budgeted Manufacturing Overhead for Each Quarter
Calculating Budgeted Manufacturing Overhead for Each Quarter
Sammy Chum, the owner of SC Limited, prepared the following 2019 direct labor budget:
SC Limited Direct Labor Budget For the Year Ended July 31, 2019
Q1 Q2 Q3 Q4
Budgeted Direct Labor Hours 40,000 30,000 48,000 44,000
Direct Labor Cost per Direct Labor Hour $13 $20 $8 $11
Budgeted Direct Labor Costs $520,000 $600,000 $384,000 $484,000
For 2019, Sammy budgets $615,600 of manufacturing overhead. The budgeted manufacturing overhead cost is normally allocated based on the budgeted direct labor hours.
To determine the amount of budgeted manufacturing overhead for each quarter, we need to calculate the predetermined overhead rate for each quarter and then multiply it by the budgeted direct labor hours for that quarter.
Let's calculate the budgeted manufacturing overhead for each quarter:
Q1: $152,000
Q2: $114,000
Q3: $182,400
Q4: $167,200
Calculating Steps
To calculate the predetermined overhead rate, we divide the budgeted manufacturing overhead for the year by the total budgeted direct labor hours for the year.
Step by step calculation:
1. Calculate the total budgeted direct labor hours for the year:
Total: 40,000 + 30,000 + 48,000 + 44,000 = 162,000 hours
2. Calculate the predetermined overhead rate for each quarter:
- Q1: $3.80 per hour
- Q2: $3.80 per hour
- Q3: $3.80 per hour
- Q4: $3.80 per hour
3. Calculate the budgeted manufacturing overhead for each quarter:
- Q1: $152,000
- Q2: $114,000
- Q3: $182,400
- Q4: $167,200