Complete Problem # 30 in Chapter 9
Direct Labor and Overhead Budget
Ash Company manufacturers telephone handsets under various brand names. The company has built a strong reputation based on quality telephones and has been profitable for a number of years. Harriman Lassiter, the company’s president, has decided to make a significant push for labor and overhead cost controls in the coming months because of increased overseas competition. Harriman has asked the marketing and accounting departments to provide data related to labor costs and manufacturing overhead. Production budgets for the period ending June 30 as follows:
Month Units Month Units
January 25,000 April 28,500
February 27,000 May 31,400
March 32,000 June 34,500
Each telephone requires 2.5 hours of direct labor for assembly and testing. The company currently applies manufacturing overhead to production at the rate of $7 per direct labor hour.
- A direct labor budget for January through June. Direct labor averages $15 per hour.
- A manufacturing overhead budget for the same period.
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